sell off continues, but...

...we can't really feel it.    The selling continued and main indexes are now down a fat -520/-115/-65 since Friday's highs. A bounce seems inevitable and/or at least getting very close.   Nothing has changed in the marketplace as the same Oil and Financial noise burdens it and nothing has changed in our strategy now.     It's pretty obvious what that is in our most recent Journals.   We have very little exposure ( a few selective holds in our favorite sectors) and it is better to wait than act and be caught in a ugly session such as yesterdays.    When we are trading, we are sticking to those favorite Ag-chems and Coal and our Haynesville Oil Shale stocks, the Shale names were highlighted in DJIM #23 and a few of those names bolded that are not in our Shadowlist as of last weekend should replace a Shippers, Solars names.  We're not playing hero with these dogs as they take it on the chin.    A dumbfounded, but still cute CNBC anchor yesterday to Haynesville idea was funny to see.   The analyst responded "you heard it here first from me" in regards to this play. yeah, okay guy!. 

One thing to point out today is last time ACI got downgraded it hit other coal names.  One point that is not covered by Briefingcom this morning is JPM is raising 2009 estimates for coal pricing to $300/metric tonne from 240 and all their estimates for covered coal companies rise under this new pricing, even ACI.    MEE is one under their umbrella.   All the downgrade for ACI means is it is more fairly valued than the other names they cover.   So, if their is any misinterpretation from the downgrade with coals getting hit, we'd use it as buy opp'.

It's pretty simple now, so not much to add going into the trading day, except maybe read over most recent Journals as to what we're thinking and what names we're into...

DJIM #24 2008

Another week of the market being held hostage by Oil and the Financials/ Brokerages has passed.  But, heading into this trading week we're possibly in a position to see a 'change of pace' this week as GS and others in their group report, while Oil is on the verge of doing something from a technical analysis position ( forming a pennant formation).   Hopefully, these dynamics can make the market move in either direction just to give some clarity.   The only positive to possibly takeaway from last week for the overall market was that Fridays move didn't fizzle out like every other move during the week.   We're not overly excited about the action, we were more excited by the continued strength of our heavily followed as at least 8 put in New highs.   Of course, this consists of Coals ( ANR PCX MEE JRCC ), Ag-Chem ( IPHS MOS) and those Oil Shale plays like GDP.   The theme heading into this trading week remains the same from last week..."When we are trading, we are sticking to those favorite Ag-chems and Coal and our Haynesville Oil Shale stocks,.."'

We've updated the Shadowlist and have included the GMXR XCO Shale plays noted before, while removing the Shippers and China stocks to a secondary list for now.

A few have asked why we follow the $CRX and not the CRB index.  The reason is the Morgan Stanley consists of individual stocks with some of our favorites being the 2 largest positions POT 6.7%, X 6.55%, while the CRB uses a 4- tiered approach to allocating among commodities included in the index.  Group 1 includes only petroleum products with Crude Oil having a 23% index weigh.   We simply find the $CRX a better measure as it's based on shares of widely held and therefore seems to give a better insight to intraday activity of where our stocks may go.

As long as our groups show leadership in an uncertain market, we won't stray...unless it's to bet on Tiger Woods today.

..what the world needs now....

..is some SHALE and POT!!.   Okay and some COAL, if you wanna get down and dirty.   This market can be just as depressing as the Barclays commercial played on CNBC,  if you're not in the right places.   Visit site to see.   A meandering, yet slowly spiraling market with sights on testing early year lows can make for a downer unless sooner or later you begin to participate, hopefully all DJIM members have gotten it or else why would you still be here.   We're glad to see posts like yesterdays in the forum and the emails we receive to let us know we're not doing this all for not.   As far as this market,  it is to the point where we are oblivious to the major indices as it has almost nothing to do with where we are.  Yesterday, the market should have been just happy enough to go green after GS didn't toss out a bombshell,  it was almost a non-event which should have done something positive for the market.    Maybe after the LEH re-org, GS, more reports is what is needed.   GS didn't seem to be enough.   Instead of a happy market,  we got barely over Mondays highs (SPX) before a steady slide that went a little to deep.   Maybe expiration week can provide a move before, either way..honestly!.  Just give some clarity to all those trading, investing elsewhere.   Elsewhere as in places other than the commodities!.  Excluding the ETF's in our shadowlist used for guidance, we were at 21 stocks making new highs which is about 50% of the stocks listed.   Doubt this can go much higher, so maybe we soon we get a pullback to saddle back up.   As of now, we just go back and forth between names as traders depending on which look best at the time.    Those not trading full-time should be doing just fine holding overnight recently their favorites in each sector say.   Anyways, don't have much to add as we've given all the clarity we could recently.  As said in forum yesterday, you don't need to be heavily invested, just selective  always remembering to  pocket profits.  Opportunities will not go away as we go forward.  Money needs to flow somewhere. 

..dirty 4 letter word..

You gotta like it when CNBC is highlighting DJIM stuff months later as "coal is cool" this morning.   As for yesterday's action, it was really no surprise that coal had a pullback.   It was inevitable after this recent kick up.   The dirty 4 letter word CNBC is using this morning is coal and it ain't going away as long as crude is on the mind this year.    Didn't we just say if you really want to get down and dirty have some coal?.   Actually, it was around these parts months earlier as you know.   Considering, we profiled coal as possibly the next big trading thing in early February, we welcome any pullback after seeing many introduced here double and triple since.   We've been selective in choosing a few, JRCC has gone from $14 to 50's, FDG, MEE have run nicely and we discovered PCX and ANR in the $50's.    Again, don't fret the action Thursday, just get ready to saddle back up one day soon, but don't do it guessing a bottom unless you are a full-time trader and can move around intraday.   We noted yesterday at 10am with $CRX at 976 a stall may occur for profit taking.   Well, it did as the $CRX fell to 961 by close.   Watch 955 as an level of interest noted yesterday to either bounce or exit.   Remember, we can't say sell or buy for that matter for obvious reasons..we can only lead and say what is on mind.    If you're trading these day by day, you may have used the alert to exit a few names in the commodity area and go clean into the weekend.   But,  if you've been holding a few for weeks it's no really big deal as you've generated nice gains.  

Anyways, a lot of noise this morning in the markets and it's time to start the weekend.   We noted a few stocks we're in yesterday. ENER and SCHN because steels held ground yesterday

We will do an in depth write up on the Haynesville Shale play we introduced recently this weekend.   There are more than a few plays and you'll have to decipher which fills your needs best as there ones to trade and some you may want to just tuck under your pillow.   As with coal this play ain't going away and in months they'll be saying Shale is dirty 5 letter word.    

Have a good weekend.... Anybody watching and enjoying Euro Cup soccer?....it's so much better than watching the market take its kicks!

De-risking of Haynesville Shale play

In late March, Chesapeake CHK said that it believes the Haynesville Shale Play could potentially have a larger impact on the company than any other play in which it has participated to date.  It added the plays economics would rival the Barnett Shale play as the wells in play are capable of producing 5+ Bcfe for $5-6MM putting the acreage at a potential worth of $40,000/acre.  The comparisons to Barnett are/were no small feat and very bullish,  CHK had it's flag planted and interest spread to those who have well flags up in the Haynesville area.

As for traders here,  we said to watch for further catalysts off results of those companies with flags in area.   The results are pouring in and they have moved these stocks fast.   What you should be watching for is the above results 5+ Bcf which would suggest $40k/acre when viewing news releases of these stocks.   These are not vertical results that you may see in results of some releases such as GDP yesterday.  The more companies producing these results simply DE-RISKS the Haynesville Shale play (HSP) into a 'Commercial viable development'!.   The more positive exploration results the more de-risking of acreage in area occurs.   The acreage between Elm Grove and East Carthage is potentially worth 10-50k/acre and until a few weeks ago the stocks in this area had virtually none of this value in them, but since we alerted PVA May 30th in the $59 off exploration results,  we've seen this value go into many of the stocks GDP, XCO, GMXR, CRK, HK that have wells within 15 miles of CHK producing wells and even further away.  We noted all these stocks all around DJIM, including Forum June 2nd.   GMXR, PVA have data points further west away from CHK`s current activity and this suggests that the play is continuous to an area of 30 miles!.  Even HK`s wells suggest the play runs 30 miles east and 15-20 miles south, but the play may be limited to the north as results 25 miles were not so great.  So that pretty well draws you a map and if you see other stocks being pumped as a HSP, you`d better know where their flags are.  

Here are the stocks with best exposure numbers to CHK wells , others like EOG have 0 exposure within 15miles, while 150k outside and others with good exposure like DVN are not fit for our trading crtieria.

                                      Net acreage within 15miles -6 county acreage=  Total

GDP                                18,700- 47,000= 65,700= 281$MM value

XCO                                34,000- 120,000= 154,000=580$MM value

GMXR                              8,000-  13,000= 21,000=132,000$MM value

CRK                                15,000- 80,000= 95,000= 310,000$MM value

PVA                                 12,000-39,000= 51,000= 276,000$MM value

HK                                   40,000- 25,000= 65,000= 500,000$MM value

_______________________________________________________________

CHK                                  75,000-125,000=200,000= 1,250$MM value

These assumptions are for $10k acre (price which acreage is being bought by CHK in area)value near CHK and at 2-4k for other acreage further away.  To get a further value such as value share you need to know the share count.  This is where we all need to look as far as trading is concerned.  GMXR has a share count of around 15m while an XCO has over 100m and CHK over 480m.  Simply this is where volatility and quickest price appreciation potential comes from.   We prefer to trade the 26m of GDP than the 480m of CHK.  XCO fits nicely in between if you want to put one away under a pillow based on share count and exposure to HSP.

Basically, this is to let you know what you are looking for as these stocks will move on catalysts such as acreage acquisition, you need to know how much is significant and where it is to CHK best flags.  You can now do this by comparing to the above stats.   Just like when we alerted GMXR June 17th had bought more acreage to add to the above acreage, more will come as yesterday did with GDP and the ensuing run.  GDP got a small amount of acreage, but a surprisingly great price of $1,147K-acre.   This is only because they are covering the capital on the 1st well from a private company they are partnering with here.   It does not de-value the HSP acreage paid by CHK and others.   You also know what is a good result and what will be a bad one to make a trading decision.   This is all about de-risking this HSP play.   If some result within 15 miles of CHK doesnt meet the +5 BCFE now expected, which is the ideal number,  than you know the whole HSP players will suffer. 

As we always say, it is best to be ahead of the herd and dump unto them when they come.  This is from a trading perspective and it has been happening since we took on this play at the end of June.   This will continue and the potential is great as there are not a lot of shares available in the float of a GMXR, GDP etc. for the institutions that will want to be in HSP.    We noted recently when a money manager came on CNBC and said well you heard it here first in regards to HSP, since Jefferies'  Hogan has pumped our plays and Erin Burnett is counting the times HSP comes up.   Simply, despite this tremendous run in just over 3 weeks this has potential to be on many more radars as time goes on as this play gets de-risked for commercial development.

As far the rest of the market,   it was a disappointment again as no buying came in after Fridays dump.   Not a good sign as the market continues to show vulnerability.   Today will be no different as UPS gave the market another kick with the magnitude of their 2Q downside.  But again, all this is happening in our neighbours backyard, our DJIM yard had at least 13 stocks from our shadowlist making new highs with many of our most recent alerts such as X SCHN ENER having incredible days.  We also had very positive news late for US carbon steels producers CLF, X as Rio Tinto announced it had achieved a 96.5% increase just for iron ore lumps.   Expect more EPS/price increases in days ahead for these, we already told you of one not publically released for X the other day.

..indecisive is just fine with us.!

Everybody knew a hike was inappropriate as it would rattle the markets worldwide, what most notably the big currency traders and many market participants wanted was for the FED to show a hike was just around the corner, a reassurance we spoke of prior to yesterdays trading day to wake the dollar.   Instead these players got the bare minimum, which includes a wishy- washy...indecisive hands- tied FED.   It wasn't enough to 'pump' the dollar,  but it was just what we wanted yesterday....  "Also, if the FED is wishy washy as we expect, the dollar bulls will not be happy and this will help the commods'.    If the dollar is to rally, the market needs reassurance rates will go up sooner than later.   These plays include many "Shale" plays and a few Steel plays.." .   Going forward if the ECB does not raise rates next month and if the FED doesn't give more hints of a hike in September the dollar will most likely pare its gains.     Simply, this will give us more time to exploit the commodity plays here.

The FED reaction was initially muted,  we were actually surprised the market took the statement so well as it pushed higher eventually.   This was occurring as our commodity stocks pressed higher,  something was amiss and eventually at the close the Dow settled where we thought it would, a measly +4pts up...as in nowhere fast!.    As we pointed out,  we would not be chasing the usual 'high beta' suspects if the market bounced at some point.   Looking at the finish line at the close, one part of our preparation/ strategy into yesterday was to go with our commodity plays on weakness before or after FED decision.    The easy route is to go with what we centered on recently, the Shales, the Steels and not the cooling off Coals, Agr stocksi.    A members question might have got you 5pts on a steel, SCHN yesterday.    After the wish washy statement going with Shales, Steels was the ticket.    We're blind to many sectors in the overall market, so we can only say we had the right ones in our world as these plays were the ones that advanced and finished better than the any high GOOG, AAPL beta stocks.    We are not saying it's gonna be an easy train ride for the commods' again now,  what we are saying is the FED will not de-rail them so fast!.   You still have to be selective, either recycling the stocks or sectors, while the FED is held hostage by the price of OIL!. 

So here we are next morning, futures hit, dollar hit, many an analyst probably ready to make up for their recent exuberance over RIMM heading into earnings by saying this is now an opportunity of a lifetime..lol... Well, at least that's what we think will happen, unfortunately the everyday retail investor is most likely tired of their hype and tired of this market.    An email from a member put this market into context, many an investor is just staying out of the market, many have stayed out completely for months waiting for the market to change and not willing to play the commodity game.   We think a lot of this is probably because the prices of these stocks look to be in nosebleed country.    Unfortunately, they don't seem to want to recall these were half, a third of where they were just months ago!.   The same scene may occur months from now when some of 'Shales' are trading over $100,  this of course depends if they keep on showing the shale has big potential for commercial development.  It has so far.  Millions are being poured in!.    This is not the same market we know many of you from when we were discovering earnings gems, potential IBD's and trading them from the 10's up!.   That was a happy time economy, you are not going to see this now.   Many of these stocks have been regulars on IBD for months  and many have exited the list.   It's a whole new ball game and you have to make changes in your trading game plan.   We had to!..Get over it, if you haven't yet.    It's a tight market and it's getting tighter as in there is less sectors to play week after week.   If you're not in the right place, you're accounts are not moving or worse going in the wrong direction.

DJIM #26 2008

Really, nothing brilliant to say to kick off the week...everything we do or are looking to do is in the past weeks Journals'..at least!.  It's been a tumultuous first half, the noise of doom is becoming louder and we're still standing tall while the DJIA sinks 1200 pts this June alone, making it the worst performance since post 1930.   Bottom feeding is not our game, if we're going to spread our money out in this market, it better put in a few 2-3% day to the upside first.   Till this seemingly impossible feat other than for techincal reasons...we live by the last words here and so should all.   Some charts of our fave group stocks are up..not all...to show the potential of another leg up on breakouts...

Oh yeah, a short week gives us employment numbers on Thursday, just in time to potentially throw out the kitchen sink.  May just be a volatile 4 days!.

A few notes early morning can't hurt some of our groups...Arcelor Mittel, world's biggest wig of steel may have sights on RTP now, also MT has increased stake in Macarthur coal and PKX wants 10% in same, Lehman also upgrades PKX to overweight...JRCC acquires more reserves in hot Appalachia area,  Deutsche raises CLF to $150 from 115.   We've discussed all these types of possibilities the past little while...reserves, stakes, estimates climbing.

• The market, majority of sectors have no positive catalysts, the Shales (exploration & production), the Steels, the Coals....DO!.  It's simple, do you want to be where bearishness is contagious or do you want to be where bullishness is contagious? 

Stabilizing or just holiday blip?

For the past 2 trading we've seen what usually signals a market trying to stabilize, indices sliding from green to red, red to green and so forth intraday, one major index green the other red at the close.   Yesterday, we noted before the ISM that the market felt like it wanted to do something in a big way, especially if the ISM came in beyond the mean estimate, either way.  It did showing a number over 50 which shows expansion.  The gap down was soon fixed.   This 'feeling' was in part because the FTSE stumbled bad overnight, we had a very negative futures pre-market, yet our shadowlist high beta stocks were acting 'fishy' well (AAPL, RIMM).    Sometimes when things don't make sense, they do in the markets.  To us it was a clue to what may occur later in the day.  Preparation is always a key in trading even if what you're looking for doesn't come to fruition. When it does, it shows you were on your toes and not bleeping yourself for a missed opportunity to make dough.    Unfortunately this fishy action and move faded bad and this soon smelled of  holiday blip of volatility as the market sank lower than the gap down as the FTSE approached its last hour of trading.  Doubt this was a coincidence as we mirrored the day drop overseas.   A positive came in the afternoon as a potential reversal started with end of day volume that  may signal a bottom, SPX shows what maybe a triple bottom.   For the market to stabilize capitulation is needed, but it does not have to come just yet.   The market can rally up for sometime before coming down again, in the meantime the market can reverse.  End of day preparation payed, high beta's AAPL, RIMM closed up 6-7 pts and the Financial UYG put in a big volume reversal day.  FLR, a E&C company had a 7 point move intraday feeding off the ISM number as we alerted. 

As far as we're all concerned about the action, well... okay, we're really not concerned because we're all " Shaleheads ", right?.    Simply, more data is to be released this week, including employment numbers which could fuel markets into next week or kill it.    We want to see this mkt up 2%-3% in either a big 1 day or on consecutive days to signal any possible trend change, until we should just focus with what's been working and let the big money others work it all out. 

Shales,   we had some very positive joint venture news from CHK AH's.   This partnership just confirms more and more the potential commercial development in HSP.  We're not concerned about what it may do to the Shales today, we're just more thrilled about the long term prospects for our plays.   As speculators get whiff off this play with momentum money, we may get more volatility in days and weeks to come.  This could always involve some selling, profit taking on any of the plays showing all mighty gap exuberance as we saw last night.  On the other hand momentum is a wicked thing, so who knows how far these can go in the short term.   Yes, more than ever after CHK venture, we think it will be a race amongst the plays for triple digits $100+ as we said the other day.

Steels,   if there was a disappointment it was the SCHN EPS follow through reaction we warned of.   The results were excellent, but initially we thought they may be cooked in for the entire group as seen soon after by the action in SCHN, X, CLF.   Just as since MON's EPS result, this group may have signalled a pause, but the Ag-Chem group is dealing with the recent USDA report as well so it may not follow their flight.   One thing we were impressed about is the rebound of the $CRX of 17pts late in the day.  We need to cut through a 6 day trading wall at 969 here to know there is potentially more breakouts in store for many of the plays/ groups and for others to just get going again such as the Shippers here in the short term. 

Update on Wednesday, July 2, 2008 at 07:56AM by Demi/ YourPersonalTrader

Update to acreage of Shale plays within DJIM world to most important player CHK's 440k net acreage,

HK  275,000, CRK 50,400, XCO 101,000, GMXR 21,000, GDP 70,600, PVA 63,000.   Remember, you cant just look at acreage without knowing share count and where the acreage is.   The medium value is 20k/acre after taking into consideration those within and outside of 15mile range of CHK's.   PXP, paid more likely 25k-30k/a.  CHK needed cash after all their land acqusitions and so this is best way of raising cash and go looking for it in the markets.

DJIM #27 2008

Hope, you had a safe and nice 4th of July holiday with family and friends.   Unfortunately, there is nothing safe and nice in the markets upon your return,  but that shouldn't be a surprise as some market indices sit at mid 2006 levels.!    Well...at least we had a good 26 week of trade to be happy about, now at DJIM #27, we can only hope for a summer rally eventually to come.   Wouldn't it be something to enjoy 26 week's in a brutal market and than be part of a summer rally..bounce..reversal, whatever they end up calling it!.    We're not looking for an intraday, 1-2 day thing,  if a rally comes it should be long enough to get a nice tan!.    Last summer was great,  we hit the Shippers' hard and others just as the credit crisis was starting.   Who knows later this summer,  but in the meantime, we are staying out of the market early this week unless to swing a few intraday trades until this market gives us a positive signal.   Why?..because we can afford to be at this stage of uncertainty after a nice run!.   You don't need to trade every day of the year, you just need to be in the right places at the right time and we've done that.   Other times of the trading year, you preserve your extra made cash and wait for the next opportunity to attack!.    Let the market come to us, don't come to it right now.   It stinks, even if everyone's technical indicators are showing a potential reversal in the very near future.    Opportunities for us are not buying dips, chasing tail(s)!.   We have earnings starting this week and from early indication, our simple rule of not holding into earnings applies with a vengeance this Q!.   You will be slaughtered over 20%,  if something is not kosher in a report.   We've seen SCHN's cook in of great numbers and we've witnessed the whipping of NVDA last week.   We've seen this before,  it's not going to be pretty if this is any early indication.  No chasing what looks like a pretty headline premarket/ open for now in this environment.   No reason of being first ones in and than holding a white flag with your high buy in mid day.

Coals,  API2?.. What is API2?...It's not R2D2's nemesis from Star Wars, but it certainly caused a seemingly galaxy-wide tumult from Europe arbitraged across the pond to our markets on Wednesday.  API2, is the coal index for delivery in 2009 and it fell around 10% intraday in Europe.  The index has risen over 100% since beginning of the year, 75% in just Q2 and it was not unreasonable to think profit taking would hit one day soon.   The ducks lined up it seemed with the ECB hike the next day and the question if Trichet would show a bias that inflation control beats growth with an aggressive rate hike bias.   Also, a new Q had begun and instead of money coming into the market as the thinking goes at the beginning of any Q,  the hedgies most likely used this as an opportunistic time to throw up while retail buyers looked to start the Q buying.   Fund redemptions most likely played a part as well.   All orchestrated no doubt leading to a hard sell off.   Interestingly, China news of reducing exports and Russia having difficulty in supplying coking coal was positive stuff on the day for US co's that had no effect.   This showcases this story is still strong fundamentally, but we need to have this stabilize before chasing hard again.   We don't think a single day correction is enough.  

Steel,  it was not a surprise to see Steel take it on the chin in a 1-2 punch.  We've discussed the 'domino' factor in which no one is immune, especially in the strongest sectors to date this year.   Fertilizers, we've seen weakness already the past few weeks and they got hit as well.  A major ingredient to potential fast and furious declines in Coals and Steels is the 'rookies' who have gone into these sectors leaving the traditional non performing sectors behind in 2008.   This group of traders is not familiar with companies and the majority don't have a clue of the fundamentals in these groups as they are only chasing the fast money.   This eventually in part leads to fast and hard declines as they don't care about the fundamentals and just want to pocket what they can when they see action such as seen on Wednesday.   They don't know or follow the macro/ industry news, we have noted a lot of it in the Journals, yet even if we believe in these groups such as coal, steel for months, years to come, we still act like all the others to keep what we earned,  especially when we know how hard the dominos can fall in the strongest momentum names from the past.    Also to note, one big factor attributing to the steel decline on the heels of coal is the rookie thinking thermal coal price is used in making steel.   Well, it's NOT, it's met coal.    Also, ArcelorMittel surcharge news was misinterrupted by the market. Unfortunately or fortunately, selling pressure is selling pressure and it takes no prisoners .  No momo trader knows or cares CLF's thermal coal biz is only 2%, we have to act as traders not long term investors, even if we believe in the story.   We believed early and have rode the train believing the fundamental story would take our steel, coal plays higher early this year.  Just like the Shales recently, we try to get in first for the easy money.   Now, we simply wait for stabilization in the groups and begin to wait for the fundamental story to creep back into the market.  The sell-off was unwarranted and maybe a nice opportunity is here very soon.

Shales,  one thing you definitely could have avoided was these momo, speculative plays taking a gap down on the abbreviated Friday session, if you follow the 'domino' theory here.   We might not have technical damage as most of the plays regained 9ema, but it was a short session and unless great catalyst results appear early in the week, we can't say air won't be taken out of them slowly as we progress into the week.   Also, you must think catalysts will not have same effect they had recently as they could only provide an opportunity to get out for some.  Be careful on pepped up bids in premkt on any news as they maybe just a hallucination by the first hour of trading.  

Noise of reversal, summer rally will be heard in days, weeks to come based on technical signals.  As far as we're concerned today, we need a climate change and see leadership emerge.   Will it be the Commods' or something else?.   Hard to imagine what it could be in this environment, if not the commods' coming back to life.   Considering, we've all been busy this year in a struggling market, don't be ashamed to rest up now until signals start to cry buy once again.  This is the time to make mistakes as stocks fall below 10 week moving averages, don't be a hero.  Take a big position in cash and most importantly avoid risk.    Full time traders can always play intraday, it's in the blood.....others probably shouldn't!.  Whatever you do, just make sure you stick to who and what you know. 

..Prove yourself!

Despite the aggressive late day broad market buying, we remain motionless and can only 'wait and see' for this market to prove itself.  As far as we're concerned this is just a short covering bounce from those lingering oversold conditions and not a reversal of any significance until we see some follow through.  If this move falters today there will be quite a few disappointed players who got back in the game yesterday.  This would come in the way of selling end of day as the bottom feeders flee for another try later on.   Our strategy here is to let the market come to us and not come to it at a potential bottom.

A few things of our widely followed to possibly trade or not today...

Ag's-Chems,  this pack led by POT, MOS was the best looking group out of the all the commodities.  If the early commodity massacre yesterday was the short term bottom, it is highly possible this group will lead.

Steels,  this bunch looked frail late in the day and only CLF price hike news after the close can give it some shine.  Despite the exuberance this may show early, we feel all this news has already been priced into the stock and sector.  Simply, this type of news is why the steel stocks ran to their lofty heights recently, it's nothing new or unexpected.   Best early and fast trade might be on those in its group, but for a trade and that's it for now.  

Shales,  quite frankly the offering by CHK is very disappointing.  This giant has done everything to make analysts, investors believe this wouldn't happen.  Most recently they sold a big stake to PXP in the HSP for 1.65bln, plus another 1.65bln to fund drilling and completion costs.  So yeah a 25mln share offering is a surprise here and we'd wait to see how this group handles the news. 

We'll monitor the market closer today and if we get the itch to buy, we'll alert.   Until, we just look at the big oil drop the past 2 days and think the market had to do what it did late yesterday...finally, or be a complete dud!. 

..stick a fork in it...

No, we don't mean the market, that's already been taken care of for months!.  We're talking about the second well at the "Three Forks" formation for CLR!.   That's the second time we've stuck a timely fork into CLR from the start and just like the first alert, this one carried on all day.  One essential ingredient to be a successful trader is know a stocks potential and history.  What we mean in this case is we've already seen CLR rocket from $52 to about $64 on May 20th and so why wouldn't it put in such a move once again on an another successful well.    It also helps that CLR has been consolidating for nearly 2 months.   We don't need a geology background, we just needed to understand this well had stronger production potential than the first and most importantly know the stocks trading history.   Considering they didn't exactly discover the cure for inflation or something, you should look at the chart and see what it did the next day and/or week after its May 20th run to decide on what you probably should have done late or should do with it in the near future. 

As far as the rest of the market, yesterday was a whacky trading environment from the opening bell to the close.  While we're on the topic of gas, as soon as this market gets the whiff of some in the form of a rumor it runs for the hills or more like down the hill.   The late day plunge was almost comical.   We also had everything from what looks like a run on LEH to a nice move down from Coal stocks of up to 5-7% without a gap in minutes at the open to a very nice reversal later in the same names.   The only reason we alerted the potential early short before the open was because these coal stocks were either flat or up heading into the open.   If they were down already, we wouldn't have as it would be useless.  We talked about the API2 the other day and we knew what happened early in Europe, the rest of the market seemed blind to it as these stocks were about to open green.   Didn't they learn already what the thermal coal price overseas can do recently?.   Sure this was a traders dine and dash trade, but the last 2 days prove even if this looks like a difficult trading environment, you don't have to be a full-time trader to capitalize on the CLF and rest of steel move from Wednesday and yesterday's move in CLR.

As the market shenanigans continue with the LEH, FNM, OIL,  we aren't paying much attention to the market indices, but on the often mentioned $CRX.   

..okay, what now?

So far this month has been nothing but a non-stop elevator ride.   We'd like to say we're stuck in an elevator and the market is consolidating, but this has been nothing other than one continuous up and down daily ride.   Today should be no different as it's June retail sales time, PPI and later it's Bernanke's congressional testimony with sidekick in tow.   By the end of the day these guys will feel like the baseballs from the Home run derby.  The market may also feel such after Bernanke delivers new mid- year Fed forecasts.    We've already had a rough overnight in foreign markets in anticipation, including the dollar falling to record lows vs. the Euro.   So nothing new today, just more of the same?.  Maybe that's wishful of more of the same up and down routine, sooner or later all the ugly ducks line up and the market gets spanked hard.  Today, we have more than a few uglies and potential for more as the day progresses.   Everybody is waiting for that big capitulation fear day.  Fortunately or unfortunately, it may not come unless the commodities-energy's get a beating simultaneously. 

As far as the trading day Monday, it was more of the same song we've been singing as our commodity plays make us oblivious to the popcorn market, specifically the Financial stocks which require popcorn on hand because of the entertainment value they provide.  The Coals exhibited early strength, a few getting 5-7% moves before a noon slide back.   Still, all managed to finish green.  The Ag's performed well, we're concentrating on the POT alerted Friday as a buy and MOS these days only.   The news form MOS last night is very good for the group, but will probably go unnoticed in this environment today.  The news is a definite agreement to sell a Nitrogen business (1.6 bln) to Yara and will close in the 3rd Q.  Yara is the world's largest producer and marketer of nitrogen fertilizer and this transaction/cost implies the value of fertilizer assets.   TNH, CF are other nitrogen producer names here.    As far as Shales are concerned, we have more offering news from GMXR.  Considering the OS in GMXR, a 2mln offering is about 20% and we'd avoid this name .    We hardly ever say go a stock short, but one way to trade DJIM plays is to either back off the stock or short it when we go off it.    Still, a thin volatile stock like this carries too much risk for the average retail trader.  The rest of the group plays you can monitor daily upside or downside off what CHK is doing,  if there is no catalysts fueling them on a particular day.

Anyways...Careful today... 

* A few members were not receiving email yesterday, our site posts go out in bulk simultaneously from a server in NYC from our site administrator.   We have no control over what AOL, Yahoo etc do with it.    It is out of our control once it's sent and out in space.  We've seen this over time primarily from AOL email account holders.   Besides visiting site eg. before the open to read Journal, we'd suggest a more secure and dependable email address in the future.   We'd also suggest going into profile on site to make sure you are still subscribed to the page(s) you require email from time to time.

..July fools?

Last time we had such a market gain,  it was back on April 1st!.  Is the joke on us again?.  Maybe not for the next week, month or so,  maybe even a 500-1000pt run as last April to the May's highs is in the cards , but the chances are still greater we're going to test these recent lows all over again.   This week, we said everybody is waiting for the big capitulation fear day and it would not come unless the commodities-energies get a beating simultaneously.  That same day we had a market down big time at the open and soon after we saw a beating of crude in a volatile trade that took all of 10-15 minutes and than a significant market recovery.  Of course this takes Exploration & Production Shales, Coals which are all energy related down.  Wednesday, we had more of the same as Oil took it on the chin again.  Include favorable earnings from WFC and INTC and the market had all the ingredients to run.  Times are different and a big capitulation day may never come as expected,  maybe there was enough fear Tuesday morning with the Indices down sharply followed by a historic fast slide in oil that may be enough to trigger a nice move.  Not a nice move as in coast is clear for months to come, but just enough to get us through the summer!.

As we said before the Wednesday trade, you have to keep a closer eye on energy prices and sentiment.   We all saw the new found volatility Oil can give just the day before and the damage it could do on commodities in a very short time frame.   Right now, following a 2nd day of oil dropping,  the sentiment is definitely a lower Oil and you need to know the ramifications of such in specific groups.   If you got greedy and did not take the 5-10% gaps up on coals such as WLT, PCX thanks to the ANR deal, you probably blew it all once the oil/ energy inventories came out.  Two mistakes there were possible as a trader, one is you got greedy in the first place by not selling the gaps and the second is you weren't paying attention to oil, especially on the day of inventory numbers.     Simply, the sentiment changed and we're not going after the Shales, Coals, Steels the rest of the week unless Oil shows the same volatility to the upside.   Only Ag's are a possibility now until we see where oil stands in the next few days as we expect some news flow.    We are simply at the mercy of Oil even more now and we have to respect where the money flow, institution money is going this week.    We've seen in the past year how powerful a bank- financial rally can be for those individual names,  we have to keep this in the back of minds as to something we'd start to play heavy, but it doesn't mean we're gonna start this week.   Right now, we are going to concentrate on the earnings coming out.   Basically, we're looking for fresh meat to trade and freezing the other stuff we've played for now, unless a news flow catalyst appears.  Time to hit the books and get back to old DJIM basics for the time being....earnings.

DJIM #29 2008

It's quite simple what traders are waiting for this week, does the 4 day rally have enough follow through to signal re-entering the market?.  It's also quite simple of what are the main ingredients for this potential follow through and that is will Oil stabilize after a 16 dollar/3 day flop and will earnings continue to be better than expected, especially from the financial sector.  We've had the leading groups crumble last week and now is the time to look around and see what new group starts to lead the market.  Leadership is essential for any follow through and it's almost unimaginable to think the financial sector will lead for too long as markdowns next quarter are still a possibility.   Basically, we need a little bit of everything to sustain this move and we`ll wait it out to enter the broader market.   We hope this all leads to consolidation early in the week to trigger a higher move after a pause.    Cross you fingers.   In the meantime,  we`ll look for individual earnings surprises to trade one at a time in what is the busiest week for reports.

..bleak

Easy to sum up the earnings reports in a few choice words...big miss, downturn will worsen, quarter even worse than we thought, not immune to a deteriorating consumer credit environment.   In no specific order,  this covers the scope of what's out there from AXP, TXN, SNDK, AAPL, WB.    Not so little fish they are.   A few reports out there are decent, but most likely will be lost within this mess.   What we do is turn a blind eye to all this as we have for most of 2008 and concentrate on commodities as Monday's trade was not bad at all.

Ag's-chems, the only group we had on radar last week, we noted a 20% increase in certain prices coming and said to watch for news flow stemming from it, including EPS raises.  Yesterday, we had a big EPS raise from JPM on POT and this exploded the entire group. JPM also raised CF.   MOS CMP were the other names noted last week and they both joined in.

Coals, this was interesting as London API 2 prices were dropping hard early in trading overseas, as much as 5% taking coal down to 178/tonne.  Soon a report hit the wires that MTL, Russian biggie was interested in getting a piece of an North American coal.  We have discussed this in the past as an important part of the coal trade as CLF was rumored to be one to be eaten.  This report included the PCX, MEE, FDG all DJIM coal plays.  This is no surprise and the move may have been exaggerated, but we'll take any catalysts to make these plays look better again.

Steels Shales,  it is no surprise these caught on with the commodities above and a higher oil price.  We have STLD with good earnings this am.   We haven`t changed our shadowlist,  we`ve had no reason to and yesterday could have a been a profitable day if you know how each play connects and to what.  Still, this a traders environment and we can`t say with confidence these groups are out of the doghouse for those that want a longer hold than a few hours.

What`s bad for the AAPL and the whole broad market, is probably better for all our commodity plays as money has to flow somewhere away from the troubled groups.     At least,  this is what we hope for in the short term as we simply turn a blind eye to all the noise out there today and concentrate on what we`ve been looking at all year for a possible trade again.   We have no choice,  it`s is bleak out there and a follow through from last week looks to be roped in.

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