Chemical reaction...

The trigger earlier was a nice report from MON, a report we noted to watch in the previous Journal with secondary plays in tow. Unfortunately, the market was just not able to gather any momentum outside of the oil, chemical and mining area.    Semi stocks also got hammered today but fortunately we haven't had a semi stock on our watchlist lately.     For what it's worth, most of the stocks on our watchlist had a decent day.    So what can we conclude from the action today?   You want to be trading the stuff that is still working.

Tomorrow's job report, assuming it's decent, should provide some relief to this market in our opinion.    Market is really in need of a bounce and it wouldn't surprise us if it shoots up because of a bullish job report.    Basically, this is what we meant by  "more of the same"  trading environment starting the year.    Just when you think we should test the November low, we may just get a hard rally over the next week or two if we don't break Nov. lows.

Regardless, lets look at some of the stuff that are working today and recently....

Chemical biz, as long as the earnings are exceeding the expectation, there's no reason to believe  this run-up is over.    The group (MON, AGU, CF, MOS, SYT, TNH...) had a big year in 07, it's looking probable that the group can carry the same momentum into at least the early period of 08. SYT, is a new name we tossed out into the mix and it didn't disappoint closing at highs.

Solars, the one thing we have to remember is that we shouldn't get too greedy with some of the volatile and speculative names.   It doesn't hurt to take some off the table and reload when things are calmer.  Thursday was definitely a day for the cheaper alternative energy plays as AKNS HOKU DSTI etc.

GU, this is a play we are putting on our active watchlist and started a position earlier today.  Briefing mentioned it after our note by throwing it into a mix of the names above.   We think this area may deserve some more attention now that the oil price is hovering around $100.    Based on its action today, we think it has caught some traders attention and we are hoping that the momentum will pick up from this point on.

SDTH, this one can trade in a volatile fashion but it does feel that its trading path is going higher.    You can take advantage of its swings to trade around a core position.   Friday is the day that will determine if it'd be added to IBD100 or not.    In our opinion, you'd want to buy dips regardless what happens tomorrow and remember this is not a one trick pony as in being a pure IBD play only as it is in the AG/Chem mix of names.

China plays, it seems some of the Chinese plays like CMED HRBN  have been doing really well recently. Throw in the IPO name VISN as well now. We are also keeping an eye on some of the older favourites WX, EJ, STV, EDU just in case they get a bid too.

Friday is likely going to be a very busy day and we'll be looking forward to it.  Today was a day you wished the market closes at 1-2pm, hopefully, today we're not wishing it never opened after the report comes out.

DJIM #1 2008

Who would've thunk it that by the time we put out DJIM #1 of 2008, we'd be down between 4 and 6% on the major indices for the year .  Add the 10% off recent highs for the RUT and we have a mess on our hands.  An incredible week of headlines..ISM, FOMC minutes, employment report leading the way to a one sided week as the techs, small caps continued to fall for a 6th straight trading session.  Our methodology was always to not hold stocks into their earning reports, now 2008 is shaping up as a year where we might never hold anything at all into an ISM #, and especially payroll number!.  Imagine that!.  Talk about a daytraders market, a long term investor will see any gains generated quickly on a gap down like we saw Friday in this environment.   This will be a difficult market to move around in, the nervousness has really set in and it makes the credit crunch we've traded through look like child's play now.    Simply, the hype during the week to the payroll report led to something all feared, but there is no use to moan and groan and analyze here.   There`s enough media outlets to harp on the events and possibilities it holds.   We have to look to the very short term possibilities this week.    This includes a very technical bounce scenario that even has the Bears thinking a recovery of sorts is inevitable now.  How long it lasts if it happens is any ones guess.    Examples are The NASD comp, if you draw a trendline up touching  Feb-Mar, Aug bounce levels, the DOW you can go back to March, Aug and early Dec and do the same,  the SPX on its 400ma you can see the bounces Aug and December. The volume late last week suggests the panic has not set in.  Selling positions on Friday`s gap down could have been a losing proposition as it was day 5-6 of losses for the indices with technical bounce levels setting in.   The desks will finally fill come Monday as everyone gets back to work and many will start to see bargains in front of them.    Another possibility that can scare any Bear is the FED giving a surprise rate hike before the scheduled meeting as in 2007.   This market needs some intravenous therapy and it won`t be a quick fix unless the FED surprises, otherwise it will be a slow drip of help that could include technical, earning surprises etc.   Maybe the techs will get some help from the CES fair hype this week. 

As of now,  we are not going to change our trading methodology and what we have traded with success while the odds of recession grow.  The time might come where we have to look seriously at Golds, Oils, Widgets or consider shorting seriously, but in the meantime there are niches that we are familiar with that still have momentum in`08.   This inc. Chemical-Ag sec.   There are many things we can rally off and retrace back.  We need to see a start of it early this week.  Let`s wait and see...

DJIM #2 2008

Get ready for the battle ahead!   The coming week may give us a tradable short term bottom, if the weeks barrage of Eco#'s allows.   With financial companies like C, JPM, WFC, MER.. reporting, we'll have another in depth look of how things are unfolding with this sector.    Chances are, more write downs will be announced by the financial companies but the stock reaction may actually be positive.   Why?   Most of these companies have dropped quite a bit since last quarter in anticipation of more write downs and it isn't a surprise anymore.   We think that some of the financial stocks have priced into more write downs.    Also, with the recent buyout of CFC from BAC and new investment from sovereign fund/investor into Citi, this sector may just seen its bottom, for now.    We also noticed that during Thursday and Friday's poor market showing, financial companies have even managed some good gains.   This is a sign that the sector is bottoming.   Of course, this is still a process that can last days but it does look encouraging.    Bear this in mind, we still aren't going to go out and shop for financial stocks.    What we feel is that the stability in the financial sector can provide stability for the overall market.   Hopefully, any short term downside risk is limited at this point.    This is why we pointed out on Friday that despite the fact we dropped to near Tuesday's low, aggressive pressing of shorts at this point could be dangerous given the events that are coming up in next week.     Basically,  what we are feeling is that there's more favourable excuses/catalysts to trade up than down in the coming week.

Besides the financial stocks, we have a number of market impacting technology stocks reporting this coming week.    Believe it or not, with the way some of these technology stocks have been dropping, it's as if all those companies will report a big miss and forecast negative growth for the coming year.     Yes, that sentiment is a little too extreme.    So again, we think the potential trade is to the upside from this earning period.   We are looking for key reports from the likes of IBM INTC to give us some clue.

Given some of the heavyweights reporting this week, it doesn't mean that we are going to go all out and bet on huge upside movement.   We are simply going in with an upside bias and trade aggressively if things do turn out the way we feel.    However, keep in mind that this is still a very turbulent market and if things don't turn out the way we like, then we still have to do the right thing.     So, be there and be prepared and let the market do the talking.

Our playlist isn't changing and we'll focus mainly on the hot sector at this time(chemical and agriculture), with names like MOS MON TNH CF CZZ and SEED COIN on the more speculative side of trading..  We'd be playing a combination of big ones and speculative ones so we don't get left out on either.    We'd also play the market betas like AAPL (MACworld coming up) RIMM BIDU in case if the market rallies and/or some techs report favourable numbers .   Again, this is not the time to find a winner before everyone else.   This is the time to play what everyone else is playing when the direction is in our favour.     

Jan 15   PPI, Retail Sales    Jan 16 CPI, Industrial Production    Jan 17  Housing starts/ Building Permits/  Phily Fed/  Initial Jobs claims   Jan 18 U of M confidence

... a IB'Machine market

Coming into this weeks trade, we noted this market is looking for positive catalysts to move it higher and we got a good one Monday premarket ,  IBM!    Funny thing is, IBM was  probably dying to pre-announce a good number because its share price has also been under tremendous pressure lately.    This is IBM's way of saying "you've been selling our shares for the wrong reason"!   ($28.9 billion and earnings of $2.80 per share versus analysts' expectations that called for revenue of $27.8 billion and earnings of $2.60 per share).  Ok, so what's good for IBM is pretty much good for everyone.    You can argue that it's a technology oriented company but since it's a big part of Dow,  it'll just about lift everything up.    Certainly, the technology sector benefited the most from the IBM news and most of the betas names (AAPL RIMM BIDU etc.) followed with decent days, yet a few of them traded within a small range after gap and didnt give the usual payoff intraday trade.

This is the exact sort of scenario we've been talking about and looking for to help the market get over its hangover.    Good growth forecast from the corporate front can put that much needed confidence back into the investors' mind.    Now we are that many points away from last Tuesday's low and this whole process is what we called "marking a bottom"!     In the days ahead, we are also going to hear from many financial stocks which will provide an even more important clue as to how this market will react and trade to their news.    IBM's news today merely set a tone and it's far from over that this market will get super bullish.    If this market rallies again off earning reports from the likes of C or MER, then we are safe to assume that we have some good basis to build up a rally during the next little while.     Also, in the technology front, INTC has a bigger impact than IBM when it reports this week and it's guidance will be closely examined.  Still as of today, we have a flood of ECO numbers this week to deal with that will either salt the roads or make them slippery once again.

Where to play?

Just because the overall market is in a good mood, it doesn't mean all stocks will rally hard.     Again, as we have been saying for a long time, we have to stick to stuff that is working and play the right kind of stuff.    If you didn't have any Chemical/Agriculture stocks in your account, you would've probably under performed today.    We are not going to go through all of the plays again today as you can easily check for yourself from the top gainer list.  But, we did add an extra name to the DJIM 2008 trade list that is connected to this sector just after the opening bell..FCSX

COIN-SEED, these two cheapies went in opposite directions today, but you could've locked in profit in both early on had you gotten some on Friday.    As far as COIN goes, the volume is extreme and it doesn't look like fun is over yet. 

FCSX, this morning heads up in the $47s turned many heads as it shot to mid 52 on a record volume break out.   There was the earning beat, but a major component of the trade today was noted, " commodity risk manager...."  The perfect day for a company whose business consists of... Sixty percent of their clients are in the agricultural industry. And corn prices have been highly volatile and at record levels due to the demand for alternative fuels.  This not a new name if you check out IBD. It was #6 this weekend 98comp 99 eps 98 rs.  If the move was missed, it is probably best to wait for a pullback.

SDTH, this play has been basing and consolidating and we believe it's inevitable it'll try for that $15 IBD 100 level sooner or later.     We are willing to buy on dips and accumulate. 

APEI, this closely followed DJIM stock chart popped up on a IBD page this weekend and we'll take it for this little known IPO. A little discovery in the form of volume is all it needs. 98 COMP 98 EPS 94 RS.   Remember this has only 7mln shares OS and of course fewer in the float. 

Earning domination...

If Wednesdays move was a technical reversal, then today's follow up move is purely due to some new found earning momentum.    We had a number of technology stocks ( QCOM WDC FFIV TRMB...) gapping up because of their earning reports.   This in turn, helped many other technology stocks that have been battered recently to gain some good momentum.     The game has clearly turned since yesterday from sell on fear to buy on hope.   The hope for many stocks is that they'd release better than anticipated earning and give a rosy outlook for the year.

In the case of MSFT, we had a pretty good report including good guidance for the whole year.    This again is causing all sorts of technology oriented companies to move up in tendon in after hour.    Friday is likely going to be a good day and we'd be buyers on dips if they come.  Some of the usual Friday profit taking may creep into the equation following this quick trip up.    At this point, we can feel that many market participants are just "afraid" to chase up this market thinking that we are still doomed for recession and this market will eventually find its way down and break new low.  You can't blame'em.  That analysis may very well be true.   But first, we have to try and take advantage of this rally at hand.     We feel that we are at least safe up until the next Fed meeting(which is next week), if not the whole month.    Why?   Clearly, companies that have released good earning have been rewarded nicely and some beaten and forgotten stocks like RVBD ride the coattails.    This is the confidence traders look for and more speculation on potential good reports will put more money at work, it's that simple.    After this earning period, then we can focus on the actual economic side of things and prepare on a longer term strategy.   For now, this rally is most definitely becoming tradable.

We have to admit, markets action right now can make even the seasoned traders go crazy.    Even though we have to be aggressive and take advantage of things but the thought of carnage that happened merely 48 hours ago can curb your actual execution.     Basically, it isn't easy going from super cautious from the back of a deadly drop that last 2 weeks to super aggressive to trade this pop.    The transition isn't easy and you are not the only one feeling the pressure.  The bargain hunters and more long term value investors are the ones who will probably make the most out of these last few days in the long run.

Now some sectors and plays...we outlined the reports coming out Thursday to get a better picture into what may be tradeable...

Chemical/Agri.,   POT's earning is definitely helping the entire sector to pop up on good gains.     We really like this sector and even though some of these plays can be super volatile, we'd be inclined to buy on dips quite aggressively assuming this market isn't going back to yesterday's low any time soon.    Our favourites include MOS MON POT CF TNH.   In this kind of market, bigger is safer and easier to play.

Solars, this may be a tricky sector to gauge now as one report from SPWR was getting sold off while another report from WFR is getting bought in AH.    The only conclusion we have is that it is going to be more of an individual game for this round at this point.   As long as the good reports get bought up, we will not write off this sector.

Bottom line, even though we may enjoy a couple of good days ahead but it's still prudent to set stops and take potential profit as we move along.  Nobody likes to sit on cash during a long decline so now is the time to take advantage of this market.

Inevitable retreat...

Perhaps your watchlist still showed quite a few greens and it made you wonder if this market can continue last week's performance.     To us, when the major indices pause at the resistance, it's simply either standing on the side or start considering shorting the broken (crappy) names.    Either way, today is clearly not a day to enter or chase any new longs.   Sitting on your hands day as far as pulling the trigger on new trades.   We just continued to do what we did a lot of Friday and that is take positions off the table today in anticipation of further consolidation.

To be honest here, we aren't impressed by this particular earnings period thus far and winners have been far and few in between.    Obviously the chemical/agri. group has been the most consistent in terms of earning but we just can't say the same for others.   It's basically an exercise of finding oversold stocks that can come up with a not so bad report.    In addition, despite the fact many well known names have been beaten down going into the earning, they'd still get hammered after a lousy report.     This week we have the CSCO report to deal with.    Actually, we'd rather not look forward to its report because we still remember what happened after CSCO's last report  in early Nov.   http://www.djimstocks.com/journal/2007/11/8/cscothe-straw-that-broke-the-camels-back.html  

In any case, we are going to be very light on the long positions and only start dipping into names at levels that we are comfortable with. 

Right now, we are due for a pullback and that's the bottom line.    You might be attempted to buy on the first dip but we think it's wise to wait a couple of days and scale in on the purchase.     In the current market condition, there's absolutely no rush to buy anything  because it just doesn't look like this market is going to challenge highs any time soon.

Chemial/Agri.   This group (MOS POT TNH...) is of particular interest because most of them closed at or near the day high when Dow took a triple digit drop.   Had the market closed green or showed strength, we'd have no doubt to chase them.    However, even the best group can succumb to a pullback when the overall market is weak.     It would've been great if we can reenter some of these names at the level a week and half ago, but we think realistically the best entry point is probably just a tad over 50 ema.

Solars, we are actually surprised that some of the most popular names have held on to their gains today.   Again, other than day flipping, this group is still in the beaten down category and there's no need to get excited about them yet.  Coals, continued their move.  Another name we left out is JRCC in the under $20 group.

Bottom line, we might have just finished a bear rally here and the bias for many traders is still a downward market.   We have to be very disciplined here in choosing the plays and decide on an appropriate strategy.    So far what's been working is to buy the dips of strong(good) stocks on selloffs and short the weak(broken)stocks on upticks. 

DJIM #7 2008

It's just simply getting very technical out there.   Although headline news may dominate the movement of a particular trading day,  the overall movement of this market is becoming more range bound with the underlying downward bias still holding.    Things are tightening up on the technical side and we feel a move is coming sooner or later to break the latest range.   The more likely scenario recently has been a break to the downside and a test of last week's low just under 12100.   However, we may get some surprises judging from the futures trading at the current moment that coincides nicely with Fridays reversal led by financials after a BBY warning and weaker NY Empire number, Michigan sentiment.  Is the market starting to price in some of the bad Eco data?.  Well, we'll definitely know after this weeks data. http://www.nasdaq.com/econoday/calendar/US/EN/New_York/year/2008/month/02/day/18/daily/index.html

Quite a few earning reports and some economic news dominated the pace of trading last week.   Even in this recession fearing trading environment, we still have market participants speculating on earnings reports/guidance to the long side.  BIDU FSLR PCLN and even the CMG, we noted before the Friday open as a possible trade after the initial sell off.   This goes to show that speculation money is still out there.    This is definitely good news if your trading time horizon is no more than a couple of days at a time and you don't swing with huge bets.   After all, this market is only rewarding those with a quick trigger and a neutral mentality.

At DJIM, we are sticking with our recent theme of "long the good eps winner on weakness and short the crappy plays on strength".    Fading the strong market move in either direction until a major trendline gets broken should remain the theme.    Basically, this market has been trading between 12200 and 12700 over the last three and half weeks and we feel one of those level will get broken eventually.  The SPX is about mid point in a narrowing range for the last 17 trading days since Jan lows. 

For now, we are trading both sides of the market so we don't get completely left out when a strong move occurs in either direction .    What we aren't willing to do at this moment, is to commit large amount of capital to bet on any one direction.    If you want to minimize risk in this kind of environment, you just have to accept the fact that you have to churn to make a living at this point.

Chemical/Agri.  the reason we keep mentioning this group on a daily basis the last while is the fact this is one of the few sectors that is still trading near its 52 week high range.    With some names trading at a very decent P/E and a majority forecast of strong growth the next couple of years, we'd still be pounding on the long side of this group when opportunity presents itself.    You really don't have to trade every single name of the group, but to trade the ones that represent the sector best like POT MOS MON CF etc.

Solars, we'd remain very selective in this sector and pretty much stick to the saying "what's good for FSLR is only good for FSLR".    Trading a solar play that has a great outlook is less risky than trading those that don't.    If you are long those solar names that were being dumped on their earnings report, you'd likely suffer more pain once the sector pulls back meaningfully.  Citgroup upped a German solar to BUY giving a favourable outlook on the sector today.

Coals , just like we said the GS downgrade could play havoc and also produce more opp's to buy the dip.  Some like ACI, MEE took it on the chin, well actually it was a low blow. We all know most stocks in a particular sector, even if not included by name in a downgrade suffer. One that did not is FDG.  After trading it here now for a few weeks, we'd have to say there is more involved here, as in strategic possibilities.  We'd stick to FDG , MEE and JRCC for a more volatile cheaper play.

Shippers, the recent surge in DBI index, as well as earning anticipation have caused many popular names in the group to move a substantial amount off their recent lows.   After a couple of key name's reports late last week, we noted to be careful with the exuberance especially off DRYS big sounding beat.  We feel the run-up may need to consolidate for a while, especially after the fade witnessed.

ILMN, CMP continue to show strength. FSL is coming back to be picked up again.

If the Footsie(FTSE) can use todays strength which evolved from the banking stocks prospects later in the week and carry it over 6000 by the time we get started tomorrow, we could see a nice follow through on top of the futures we see now.  Qatar also said it has $15 bln it wants to put into Euro/US banks over the next year.  Some financials would not be a bad idea to trade. GS, MER etc. 

..cards on the table..

Before the open tomorrow, we'll have many of the cards turned over to indicate where we're going.  The way today went , you'd think the downward bias will continue as the Economic data consisting of the CPI, Housing starts, Retail Redbook is unveiled and digested.   It seems to be too easy, too convenient to assume today's reversal will continue tomorrow as all the charts from the SPX to IWN have a narrowing >>>>> triangle formation looking more like a downward break coinciding with the big Eco' data day.     The trading programs must be ready to go.   In either direction.   To sell the break or will it program buy if a threat comes on the lower channel of the symmetrical triangle?.   Considering this market is so unpredictable, who knows what tomorrow will hold.   Today, we probably had a trap and tomorrow it might be reciprocated.   Who knows!.     As for today, the QQQ's already broke down just after 2pm in fast and furious fashion, only to be pushed back to the lower line of the triangle following HPQ's EPS after hours.   We're not putting too much on the prospects of HPQ rubbing off on the other techs and resuscitating them all by it's lonesome.   Today's gap was erased quickly, the commodities driven market today soon faltered as this only brought on more inflation fears.   With oil kissing $100 those $600 stimuli checks might not last too long. 

Yesterday, we led the Journal off with the Chemical/Agr'si because they were trading near 52 wk highs.  A few got up to those peaks and actually held the gap up opens.   Considering how fast the move was today and with the potential of misery in the market tomorrow, this is the first place we'd look to go short in if you haven't yet during today's reversal.    Yep, you can't pick sides for too long in this environment.  

The Coals also exploded with FDG leading the charge to a multi year high of $50 and change.   We've noted the past few journals of buying the dip, including after GS's downgrade on Friday.    These guys can do some consolidating now as well.  The idea of buying a dip is not in the cards in respect to a potential overall market hit tomorrow.

VLNC had a nice volume day and hit the 50% mark since being alerted to 8 trading days ago.  Too bad the truck wasn't loaded with it, tomorrow would not seem so important... GNK up over 10%, CLB should be watchlisted for a sunny day,  if you haven't done so yet after last weeks note on them. 

A clear head for tomorrow is the only option....we'll update if necessary before the open

You have our respect, Mr. Market...

It just feels too easy that we would be starting a strong rally from such an auspicious beginning late Friday.    Sure, news flow has been pretty positive as of late with respect to the bond insurers.    But, they are only positive with respect to themselves really at this point, the bond insurers.    What we have today is definitely a divergence of force going a separate way.    On one hand, every single strong and good play we've talked about on the site for the past few weeks were doing some fancy upside moves, corresponding to the index action.   On the other hand, everything else just didn't seem to catch this 189+ point drift.  Poor AAPL RIMM BIDU, where's the momo in all of these?. Only FSLR continues to provide some fast trading action.

What's good about the unchanged rating of these bond insurers is good for some of the parties involved, namely the financials.  But they had other things weighing on them early and only started to move late after selling off Fridays upward move.   The financials are not done writing down more stuff.    In the morning,  Goldman Sachs noted that all of the major brokerage are in for a writedown of between 1 to 12 billion dollars this quarter with Citi leading the charge.   We definitely have heard this song before roughly three months ago.    Only difference between then and now is that we are in a much more difficult economic situation this time around.

Leadership in this markets rally is still very narrow.    Basically we are only concentrating on a handful of stocks and they are the same names you are probably sick of hearing by now.   Truth is, we'd like to start play some other names without having to chase those names that have become extended today.   New closing highs were always something we used to add pieces to as part of our trading methodology near the close on index action like today.  Now the market is such that you need to take the profits before they evaporate.   Unfortunately, nothing else is really coming up on our scans to turnover into.

Tomorrow, we have some key economic number to be released and they are PPI and Consumer Confidence index.    A disappointing number from those two would definitely cast a shadow over the recent rally and it wouldn't be a surprise if the market gets smacked down hard.   We've pointed out the importance of the Eco data this week and so we all should've been thinking of taking profits off by close to avoid some breakfast spillage.    Technically, you can say this market has broken out of the wedge and we are up from here.     But seriously, we just can't imagine many more positive catalysts down the road once this ABK fever wears off.     We have lightened up most of our long positions today and will be eyeing the economic reports to determine if it's worth to get back in for another round.

Plays that are working....

Agri.-Chemical,   trust us, even we are sick of seeing them POT MOS etc. going up and making new high every other day. lol   The truth is, the higher they go, the smaller the risk/reward and more cautious we get.     Ever since the group's break out on Feb. 12th, the group has not been tested to the downside.    It means that we have not seen any kind of meaningful pullback to warrant much more upside.     Sure, these names can move off a 190+ Dow day, but we all know that those days are still far and few between.     We are trading them still but with a much reduced exposure at this point.

Coal-Steels-Metals-Oil, you can't seem to have an up day without these commodity plays.    The ones on our watchlist FLS CLB FDG MEE and CLF HES are two more we've recently added... all had a good day.  Even our rock salt-potash play, CMP keeps making highs.

Biotechs like ILMN ZMH off here showed some strength as well.   Remember, we try to concentrate on earnings and most making NCH's today from DJIM were selected off their last reports/guidance this Q. 

Bottom line, although this market is rallying off ABK news, you still can't underestimate the power of a near 200 point rally.    Traders could use this as an excuse to chase stuff that was working well, regardless the relevancy.    Tomorrow will be a real test with the economic reports and if this market takes the reports well,  it's likely that this rally will continue a bit longer.

Anyways, today played out to script from our morning intro to the day.  The 'concrete' news came and it turned into a real drama for the shorts.  The financials were the beneficiary, GS and MER moved back up 6 and 3 points respectively and we didn't get the momo stocks participating.  Hopefully you didn't jump in as there was no confirmation of them wanting to play just like on Friday.  Basically, it came down to holding the stocks followed here for the past few weeks to carry the load.   And yes, the futures lied again as they set a negative/flat tone before the open.  They started to pick it up nicely in the morning before the news came rocking down.      Tomorrow is a mystery. 

DJIM #14 2008

As the jobless rate spiked down to 2003 levels, it is almost impossible to argue a recession is in place, but it is also impossible to say that the Bear haven't lost it's grip on the markets as we saw the Bulls pulling the indices up and shrugging off the jobless number.   As we discussed all last week, the ability of the market to hold onto its gain after the 3%+ rally was signalling the selling had cooled down and this time it would be different than what followed the March rallies of the same proportions.   If this is indecision on the sellers than its good sign as they are not sure of things as before, the only argument they may use now is calling the low volume suspicious and that they are just waiting to rattle the rally.   Either way, it's not your problem or ours as our goal is to capitalize when the chance arises and last week we think did just here as DJIM's players, our index you may say outperformed anything in sight.  We had some nice alert leads ahead of the curve on CMP, DRYS, MELI and it's nice to see them getting some headlines right after.     When you're ahead of the curve, you get a chance to sell to the herd!.  That's the game!.  CMP was noted on CNBC as a stealth play behind POT, MOS, we profiled it in December, and it spiked in premkt and was a feature story on IBD this weekend. DRYS was referenced on the front page of Barrons this weekend to a good story inside.    Heading into the week, it's quite simple as there is no reason to change what's working and that's everything off our primary watchlist relating to...." Agri/chem, Steels, high beta Technology to Shippers, Solars and even oil stuff".   What will most likely come to hand this week is an important technical picture to track.  This is where volume comes into play that wasn't there last week, if it comes to the upside it will drive the market through resistance 12800.  If we see the 12800 coming with dry volume, we will most likely take positions down and wait for a clearer picture to emerge.   Right now, the Transports are leading the way and that is a very important positive signal for what possibly lies ahead for the rest of the indices, including the general economy.   Little economic data flow this week should allow an opportunity to potentially trigger some of the resistances and that is what we'd closely track this week. 

We've tweaked the DJIM primary tradelist, shadow list.  We've taken down a few financials as we don't need to monitor, trade 4-5 now and a few others that are just boring now like SAM, HURC.    Still the latter are EPS wins and if we get that trade again as we're starting to see, we'd keep them close to our primary list.  We've added the GU, JST as more on the speculative side, reason speculative you may say is because we'd rather lay our bigger dollars on the expensive stuff that's been working as that is where the volume allowing for easy exit is and where the sideline money from institutions is flowing to.   In the good ole'days when EPS and sector plays from midcaps rolled these would be on top of our list probably.   Times have changed and we need to see the momo game come back to go heavy at this point in these types.   Remember, if the mkt reverses in anything that resembles the past, these lower volume, cheaper plays will slide harder and have bigger spreads going down as buyers will dry up.    Simply, don't become complacent now just because the market is good and you think you're indestructible.   Others are included following mentions in alerts, Journal the past two weeks....MELI, RIG, CSX, SCHN.    WLT is another name we're adding.

Smell the roses...

Even before the market started trading today, we all knew that this was going to be a good day.   We just didn't know it could be that good!.  Not only did INTC provide us with some assurance that things aren't that "bad", we also got a couple of reports from JPM and WFC that were well received in the pre-market.     Economic data today was also inline and some big news from Potash all set the stage for a very positive open.    Bidding up some technology stocks was easy after Intel's earning, but never in our imagination that the rally today was so broad based.     There's literally hardly any stocks that finished negative on the day and many stocks finished 4%+ with some notable gainers from techs and agri/chem sector.  Our DJIM list lit up like a Christmas tree and it's only spring.

Oil gained again today and gold finished quite a bit higher.     U.S. dollar hit a new low and every commodity play got a bid today.   Yet, equity index held steady and finished near the high of the day as it grinded higher and higher.    Today's is one of the most steady up days we can recall in the last few months.    So what is wrong with this picture?    Nothing!     This is the exact theme we have been playing for months at DJIM.     As we pointed out for weeks, commodity market is basically in a bull market and any strength in equity market will bid up every commodity related plays as well when the time comes.

Here's the dilemma!    We think if it wasn't for the commodity market, which is becoming a bigger chunk of the equity market these days, our overall market might have been at a much lower level now.    Yes, we think that commodity market is the very reason the entire market did not crash lower the last few months.    It is strange but think about it.   Do we get up early every day the last few months knowing the credit crisis is bad and economy heading towards the recession and sulk?   No!    Because we've had plays such as POT, CMP, X, FDG, DRYS..... to look forward to.     Money has to flow somewhere to get some respectable return and it sure isn't going into treasury as you'd expect.

Here are some sector run downs...

Techs, with INTC's not so bad number and IBM's pretty good number out of the way, we'd expect this sector to heat up again.    No it doesn't mean that we'd challenge new highs soon but it just means that sentiment will be changed somewhat.    These days, an inline report will get you a nice price boost given that the "normal" expectation is for you to guide down.     We like beta plays such as RIMM, AAPL, BIDU because they really play into the psychology of "tech is still worth trading up".    Of course, GOOG's report Thursday is also significant and we feel that the combination of a low expectation from Google and the uncertainty of its report can potentially give traders another positive surprise.   Again, we don't play into the earnings, but if the report is half decent, we think GOOG can get back to $500 easy.

Coal, some of the names in the group will release earning soon and we'd continue to keep a close eye on this group.   We feel this group is getting the kind of action that's similar to the agri/chem group couple of months ago.    If this group has some positive things to say in their up coming reports, we'd be very aggressive in chasing some names up.     As far as trading wise, this group has been a champ last couple of weeks.

Agri/Chem, the biggest question right now on most people's mind has to be "is there an end to all this madness"?    Stock action wise, we are not sure at this point if the run-up will end any time soon.    News wise, we think this group will only get more and more good news down the road.   Basically, this group has the kind of pricing power any other industry would kill for.

Solars, maybe once FSLR hit $300, we'd finally get some rest. lol   We think the key in this group is not about their earning power, it's more to do with the oil price these days.    Basically, with the way crude moves, this group has nothing to lose.    We'd buy on any small dips at this point.   We like SOL the most at this point and we'd play very aggressive on dips with it.   SPWR earnings Thursday will be closely watched by solar junkies.

Shippers,  recently we alerted to these guys saying sooner than later they will ride the wave of coal and steels and that idea is paying off big time.    We also don't think the move is over as all the commodity stocks are hitting new highs left and right.    We've added back EXM to our shipper list today.

Steels, just buy the group! lol   Ok,  NUE is set to release report tomorrow and we'd see how others react to it.    This is actually the group which we have the lightest exposure now,  but we are waiting for opportunities to get back in.   Congrats to X hitting the $150+ mark, yep it was around $110-115 when we alerted first.  SCHN, MTL,STLD wow as well!

Oh yeah and MELI busted the move didn't it!.  Yesterday was our exit day pre Ebay report, it's been a good ride since being alerted and now we back up momentarily.

Bottom line, things are getting apparent that not every company is being affected by credit crisis and a slowing economy.     We should not treat every company as if it's the next GE or BSC and be rational about the whole situation.     In addition, we are still enjoying this ever lasting commodity bull market.