The Big Picture - Year in Pictures

The Big Picture photo blog from the Boston Globe is always worthy of a visit, especially at Year end...

Year in Pictures: Part I
Year in Pictures: Part II

New Blog (will travel)

I'm moving to a less Blogger format for stock market content. I'll leave the CD site here up for archives and for posting occasional off-topic color. Stay subscribed if that interests you.

A dedicated address will be had shortly. In the meantime, the new site resides here.

Thank you for flying Centrifugal Deforest

Energy Sector is Pulsing (slide-show of the leading charts)

Good, Bad and the Ugly (allocation review)

This weekend's screencast is in three parts. And by miracles of science, technology, and a timely nudge from someone knowing better, they're now embedded.

...like my teeth!

Part-1 - The Bad (Heavy action overall + RR-Tracks patterns on LQDT and SWI):



Part-2 - The Ugly (ugly is you thinking this is another 2008):


Part-3 - The Good (some leadership stocks and industry groups: ULTI, CXO, SE, KOG, GPOR, HD, FAST, GWW, TSCO, Copper and Crude Oil, are all discussed)...

In case you were short

If you were caught short this week. Here's a simple rule which may be of help in the future:
In case you were short


And Previously (since my last lazy post)...
Stuck Stuck Stuck (but not like a pig):
Part-1
Part-2

Fio Fusion (Update on the Secondary; priced at $33)

Updated Screencast:
How I'm trading the FIO secondary
FIO was priced well in the hole tonight, at $33.00.

Composite of Recent Screencasts

In Case of Waterfall (identifying group money flows and preparing long-side entries): Part-1: Strong money flow into the Oil&Gas Transport/Pipeline industry group
Part-2: WFM may slice here and present an entry
Part-3: TSCO, HD, GWW, FAST
Part-4: Property/Casualty/Title Insurance - Insurance is exciting!
Part-5: Biotechnology-1 - has been consolidating; mixed picture lately
Part-6: Biotechnology-2 - Includes how NOT to play Biotechs
Part-7: INTU is nothing but net. Also FICO, HMSY, HSTM

Bear Buzz Kill (no super-hero stuff, but the bear-trap is set imo):
Bear Buzz Kill (Macro this time)...Part-1
Bear Buzz Kill (Macro this time)...a calm conclusion

Fusion-IO (and the ucoming FIO secondary)

Nuances of an upcoming secondary offer for a successful IPO
Screencast in two parts:

Part I - A fundamental look at FIO and preparing for the secondary
Part II - How the secondary helps to define a winning or losing position

Red Flag Charging (index of recent screencasts)

The red flag is out. Don't do what I do, but energy is pulsing out there.

I'm attacking still.

Recent video screencasts:
-Nov 4: Would you buy a used car from this chart?
-Nov 4:  LPSN: Another pulsing charger from Friday's tape
-Oct 29: Chargers are pulsing and the Russell 2000 is poised
-Oct 24: GNC: Clockwork study in how to play an IPO

Follow @Centrifugal to see me munched

AMZN (Small thoughts on the big picture)

There is a developing business trend beginning to gain traction. It entails acting more like entrepreneurs and focusing on the long term - at the expense of Wall Street!

As investors, we have the edge. We can sit idle while entrepreneurs work to prove their concepts.

Click for Screencast: Small Thoughts on the Big Picture

Follow @Centrifugal to fade trades in real time

Gameplan for AMZN Earnings (after the close today)

Amazon.com reports earnings after the close tonight. I reduced the core position size yesterday (for the second time). I'm looking to re-increase positions on the heels (hells) of EPS, depending.

Click for Screencast: Gameplan for handling AMZN earnings after hours.

[Update: sold AMZN the morning after earnings, 201.84 average]

Follow @Centrifugal to fade trades in real time

Hunt for Emerging Leadership (screencasts from last week)

I scanned more stocks than my eyes can bear this weekend, and smaller growth stocks are emerging from cracks. In droves.

Maybe I've been too negative lately. 

New Leadership Hunt - Newest Screencasts Oct 21 & 23:
-Part-2: Turns out, leadership is emerging in a big way
-Part-1: Keep an open mind on where leadership is emerging

Screencasts from Oct. 19th:
Europe News Becoming like Anthrax in 2001
Hunting for strength in the midst of a major sell program  

Screencasts from Oct. 17th:
Part-3 of the Psychological Tape. Explaining my now long-only stance. 
Part-2 of the Psychological Tape.
Part-1 of the Psychological Tape...Unedited  

Follow @Centrifugal to fade trades in real time

Upside Flash Crash (not out of the question)

Be afraid, be very afraid.

Bears that is.

Eventually, we should all be afraid. We're all going to be snuffed by this stuff at some point. But I'd be shitting rectangles this weekend if I were heavily short and happened to see the after-hours tape tonight.

After the futures closed, the Nasdaq QQQ's flash-crashed 2% higher in a couple seconds. Other derivative ETFs followed suit (namely QLD, QID).

My dog has known for some time we're going to get an upside flash-crash; at least at some point. I share everything with my dog - bouncing ideas of his titled little ears and see how they float. This one floats very well. Quite a few players in this business are caught under-invested and/or short right now. Machines know how to chew-up a situation like this in a hurry. Up the pipes or down the hatch, I don't see how direction has to be in a single direction. This is a dynamic.

If you're heavily short this weekend, you might go out for a nice meal, or two. Catch a movie maybe.

Here's one - Human Pets and the Machines who Adore Them

...rated PG-13

Follow @Centrifugal to fade trades in real time

Cheerio

Screening for Retail IPOs (VRA)

Using Marketsmith to hunt for emerging leadership in IPOs. Let's move onto the other hot-money industry group in this advance - (cheap and hideous) CH-Retail.

Click here for screencast

Screening for Biotech IPOs (ECYT)

Using Marketsmith to hunt for emerging leadership in IPOs (While best to avoid in a bear market, IPOs are a great source of performance protein if in a new bull run).

Click here for screencast

Updated Lists and Screens (using Marketmith)

Tonight's Screencasts in two parts:
Part-1: Updated Front Pocket Longs (hand picked)
Part-2: Updated Long and Short Lists (screened)

I'm Very Short Cancer Right Now

I need a nap just now, but I want to get this out while my manic phase is holding.

In the past 24 hours (perhaps and apparently) we've seen the end of the recession and the cure for cancer. You just don't feel so good about it yet.

Marches against Wall St. are only growing right now, as not nearly enough raider's dicks have been pinned to wrecking balls in these declines. I suppose that illustrates this post as a little cynical.

I won't disagree.

But I only know what I know (which is zero), and I build my gameplan from there. Here is what I know:

-Market professionals are under-performing their broad market benchmarks this year and the broad market is down YTD (an awesome combination for Q4 results)

-Of the largest positions market professionals hold, one of the largest is cash (while many pros are net-short)

-The market has exploded upward from an Early October low. It may back and fill. It may or may not re-test significantly lower levels

-Market professionals will chase performance to save their finite careers, especially near year end

-Biotechnology is an emerging/re-emerging leadership group

-As long as the market is rising, I'm buy leadership heading into the end of the year

This doesn't mean the market will go straight up, but, if it is worth owning it will go up more than under-invested professionals are comfortable with. To the degree they remain uncomfortable, I will keep pushing long. If they pine for a pullback though (for a more comfortable entry point) AND get more than a whisk-chance to get aboard, then I will hand them my shares [see Inverse Genius post from March 27th, 2009; for reference].

I don't mind a higher-low retest, but I prefer it to be over about as fast as these guys can acknowledge it is upon us. Scary news driving the decline is the best recipe for this scenario. The market refusing to pullback much at all though, or at least not until from higher (more uncomfortable levels), is preferred.


And I don't care, seriously. My march against Wall Street came at a very young age. I'm fighting as best I can, while I still can and I'm doing it with wooden teeth. I try to measure power and I try to measure foolery. When the two meet there is something special to glean.

Money is pretty powerful.

The leadership is broad on this rally and that is a positive. Of the highest-fliers right now, the most exciting on the tape are companies developing and/or selling treatments for cancer. I'm posting the list below and linking the Supplemental Screencast here.

I am long three of these just now and I expect to trade more from the list. While I may sell at any time (Follow @Centrifugal to fade trades in real time), at the moment...

I am very short cancer.

This is not a recommendation. Fading me is fine, but do not buy any of this list because of me. 

BIIB
CELG
ALXN
SGEN
AMGN
MDCO (coronary interventions)
ARIA
BMRN (genetic diseases)
REGN
PCYC
VRTX
ONXX

Fair well

Intermediate Term Low is In (gameplan to yr-end)

Two Part Screencast...
Part-1: Intermediate-term low is in
Part-11: AMZN is the new $AAPL, into year end

Fakedown Set-ups for Monday (ATHN)

Several healthy stocks look poised to break key moving averages. Will they break-down or fake-down?

ATHN looks best to fake-out - click here for screencast

Discipline (a sit down lecture)

After accounts were gently whacked late in the week, I got to thinking (typically a dangerous endeavor in my line of work).

I realized I should be warning readers more on the difficulty of trading a bear market. And specifically, that if you're relying on me to make money, I can guarantee you losing in the long run (clients not included!).

Certainly, we're capable of having similar ideas and disciplines and it is only natural that we'll be on the same trades and playing the same direction from time to time (albeit, uncomfortable for me). But I'm a trained maniac and there is no way to follow along with that, seriously. Every investor has to develop his own disciplined strategy, which is suitable for his specific skill-set, personality and purse strings. You will suffer otherwise and I would take the other side of your trades blindly, if I knew you were matching me trade for trade. I'd short myself!

I'm presenting my strategy, my principles and my individual trades (every trade since February, 2009) for specific reasons. There are some negatives to being this transparent, but it works for larger reasons. First, it's a way to communicate with clients (who tend to care about this stuff; fill-prices vs. others, whys and wherefores, etc.). But more important, I wanted a public record of my late-career machinations (blow by every blow) and I knew it would make me only more disciplined in adhering to my rules and principles - knowing that if I was to contradict those principles (holding a broken stock, for example, in hopes of exiting at a higher price), then I would have to hold that position publicly for all to see. It's much easier to bend the rules when no one is there to scrutinize. We tend to behave better in public, right? We straiten-up when presenting to an audience. We fart less when pretending our shit smells brighter, no?

This game requires behaving better.

Lately (you may have noticed), we're in a difficult market. So until the larger trend has changed for the better, if you see me attacking long (even if I'm good at picking good spots and decent stocks), I'll be fighting the larger trend and likely to lose money (especially if I am you!).

Decent people should never fight the larger trend, especially in a bear market. Leave the Jim Rose antics for the freaks. Don't swallow swords or hang cinder blocks from your nads because you see someone who can do it. You'll exhaust yourself when successful (thus, you'll still miss the easier trend when stocks finally do go higher) and you're only one hiccup from a bloody throat.

While I largely missed the month of August due to travel, I can assure you I would have leaned short into that death-bed of weakness (shorting is a hands-on endeavor, whereas a trending bull market is easier to manage when away from the desk). Sentiment was still fairly positive in August, while action resembled the plague. Today though, we have a slightly better tape, coincident to a plague in sentiment. Charts of indices suggest further weakness (this week clarified any doubts), but there remains a larger handful of individual charts I would buy today, than the number I saw in August (while inhaling volcanic dust in Iceland). Any name which can manage now a higher-low from September, and subsequently marked a higher September low compared to August AND has the support of it's larger industry group (meaning the group itself is of the highest rated, in terms of relative strength), is a candidate for future success.

If only the bear market would end.

I like this set-up at this time of year, largely because I've been rewarded so many times for attacking similar. In recent years, however (due to old age!), when volatility is high, I don't like getting ahead of the market (apparently I was feeling 60 again, getting ahead of the larger trend this last week). In the modern era (post 9-11) the reason I've cleaned-up every year since 2003 (and this one so far) is because, as volatility increased, I moved to a one-step behind approach and followed the market (while every genius in the biz remains bent on predicting where markets are headed, or beheaded!). I got off track with that discipline this week, even if for a good reason (as these stalwarts have all learned now and are fundamentally negative, coincident to signs of life under the market's surface).

Clever thinking is what cost me then, as I let go protective hedges ahead of the broad market improving and subsequently took lumps for it. This behavior endangered my better mood and importantly, the gumption necessary to continue out-performing. Hence, it's a little reckless.

The market is the mob - show some respect or else get whacked. Pretty simple really.

In 2002, before a new bull market had begun (check out April, 2003), volatility was low and trading was becoming very difficult. If you jumped onto a trend, that was when it would revert (up or down, it was only consistent in that it was going nowhere). This was the death of me and I knew my human trading days were numbered (fortunately for me, poker was very popular in 2002...suckers!).

Well, my days are numbered still and I'm no longer feeling 60 again. Volatility remains quite high, which I appreciate, as a mere human can still find opportunity. But I can't be so frisky (even if I see a better market than long-only heads appearing on CNBC, who, by nature, are supposed to see a brighter future for stocks than me. It's always exciting, when our roles are reversed).

Thus, I'm pretty sure October is going to be a smash-mouth gaining month for stocks, but I don't care. I'm 100 years old now and having a good year. I got away with a good quarter (just ended), but it took a lot of depleting energy and equity accounts were only so-so sick by Friday's close (still amply sick, compared to most and certainly the broader market, but nothing especially bloodthirsty). Futures accounts, however, those were pure evil, as I picked-off 13 out of 14 trades profitably during one run and avoided most of the bigger sets).

Smash-mouth or not then, I'm going to peel back some and wait for the market to take the lead. I'm going back to the 1-step behind approach that has printed performance for the last 9 years (pre-2000, FYI, I was always front-running the market, and could be counted on for +200% years - when I wasn't busy blowing-up instead).

This means I'll be lightening-up, everywhere necessary and largely laying LO -  before driving leadership stocks higher into the Thanksgiving holiday!

The longs left in my position (below), while in need of a hedge perhaps, were not yet necessary to sell.

Cliff notes:

Don't Do What I Do
or else, I'll bite your legs off!
Develop and manage your own discipline, based on your style. Then stick to that personal discipline.

Bah!

Follow @Centrifugal to fade trades in real time

Current Position: Equity accounts long-only, 46% invested

Currently Long (according to size): LO (20.1%); ROST (7.1%), [Edit: left out 7% APKT position; 1-3 day trade only], CELG (6.9%), LQDT (4.9%)

Currently Short: no current position

Futures: no current position

Streaming TICK (tutorial, part-2)

Chart.ly screencast: Streaming TICK tutorial. This is Part 2.

Streaming TICK (tutorial, part-1)

Chart.ly screencast: Streaming TICK tutorial. This is Part 1.

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

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.

Kisses.

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

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.

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.

Ha!

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

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.

Cheers.

Follow @Centrifugal to fade trades in real time

Dinosaur Brag Post (something re psychology)

The older I get the less I know - and I am ancient by now.

While I was largely on holiday this summer (the major reason I couldn't participate in the better short-minded sessions), I was confounded to hear so much conviction. More and more it seemed opinions flew, each time I tuned in, even as the dynamic became more and more...dynamic.

There is something about the human brain which demands knowing. Whether misguided or not is apparently secondary, answers are what the mind craves during times of tumult.

Since trading/investing is such a simple game, let's reduce the situation to some simple basics: The future is uncertain (contrary to what we'd prefer); the past will tend to repeat; the crowd will be nearly unanimous when standing on the wrong side of the ship; fear will drive markets up as well as down.

I'm no genius (the machine is the genius), but I'm good at measuring pressure vs. emotion. Yesterday, and again this morning it was clear that the pressure of standing against the bear-tide was not as severe as the emotion coming out of collective mouths; Wall Street's media mouths especially, but a glance at recent put-to-call ratios, moods of traders on Twitter, etc., said more than plenty.

If you are shorting a bear market and the crowd is in agreement with that action, you need lower-lows to be on the right side of that trade - period. There is nothing easier in a sick market than lower-lows, and since the launch upward from a reversal near lows can be severe, you need the confirmation of new lows.

Lack of lower-lows, coincident to increased pressure + deteriorated sentiment = potential imminent launch higher.

I will never short with the crowd when the market is not managing lower-lows (I will always cover if measurable pressure fails to violate previous lows). This doesn't mean I have to be long, but I've seen enough dramatic pivots to know that I should be thinking long when nothing but warnings and negative statements ooze from media sources, clients, traders, long-only pros, widowed orphans, little green men in tin foil hats, etc.

And it's an easy trade, since benching losses at nearby new-low levels affords a favorable risk vs. reward (the market stands to gain much more than the distance to new-lows and the market has a history of rising more than falling, even if more slowly; math is my strong suit ;).

AAPL, for example, could not manage anything close to lower-lows on the Steve Jobs news, opened at its lows and was down less than the NDX by mid-session (an index which showed clear resilience in holding off lower-lows, vs. the other major indices).

Yes, I could have gone on about this publicly yesterday, but I'm not trying to publish my bets in order to look good later. I'd rather keep objective and unselfconscious (which means I hardly post at all here anymore; since it requires getting subjective and conscious in order to let everyone know how smart I think I am).

So while the machines render me more and more useless, psychology remains a factor in markets and I still have something going for me in that department. It may require waiting longer and longer periods for gains like today, but psychology and its relationship to simple supply-demand dynamics will likely not cease in this lifetime.

Anyway, back in my cave for now. I'm booking a trip to Coney Island.

Follow @Centrifugal to fade trades in real time

Stuck Stuck Stuck (but not like a pig)

Unfortunately for me, drama waits for no one.

I finally got caught and with a third of fingertips on the stove-top. My real mistake was not selling Monday's open, as per the general plan; something of a blunder.

Aside from that I have no complaints. No one likes to lose money, but in this business when you do lose, you need the guy next to you losing much more. My year remains successful.

As for the market, there are more dedicated views than mine just now, but I'm not particularly bearish (and certainly not bullish). There are numerous broken heroes and subsequent industry groups (always a recipe for caution). And yet, damage to the indices, relative to the drama, has not been especially devastating. We’re flushing now, which can mark a short-term low, and while there is a flurry of lower- lows (certainly compared to June-lows), new 52-week lows are far from significant. In other words, the broad market might be less unhealthy than the surface and certainly vs. the current emotion and sentiment.

The environment is still tricky and being aggressive here (long or short) is perhaps ambitious. I’ll continue with a low profile, but if I can see a tradable bounce (perhaps off of today’s lows) I might push aggressively for a day or three and then back-off again. Otherwise I'm just looking at stopping out of positions (late-session if without severe volume + downside). The current portfolio is damaged, but less so compared to the market; I’ve just had too much of it for this week, and without any hedge since last week.

Take what the market gives you and be patient when action is tricky. There was plenty of short-side opportunity lately, but that requires serious attention and I've been in summer mode. You are young and can last all year, so you’ve been able to take advantage of the volatility; you got me there ;)

Enjoy.

That's my thoughts, in rambling fashion; for the record if nothing else.

Follow @Centrifugal to fade trades in real time

Total Position: Currently 100% net-long, 34% invested

Currently Long (according to size): JNJ (9.4%), BMY (8.2%), VRX (6%), ACTG (5.9%), RBN (4.8%)

Iceland 2011 (Þorlákshöfn, Arctic Tern, Jökulsárlón)

Iceland 2011 (Mývatn and the highlands)