...a fickle lot

..and picky..picky aren't we!.  After the 3rd 3% day on the indices in less than a month, traders were in a corrective mode and excellent earnings were tossed to the side in many respects.    How else can you explain MON being taken down yesterday on the same numbers they only guiding up 2 weeks earlier?.    What did the crowd expect in 2 weeks?.    Last night we had RIMM report excellent numbers and guidance and the highest price it saw AH's was in the low 120's.    Not exactly the same exuberance as we usually see from a mighty report from RIMM.  Are these reactions a negative?.    In our view..no...as we are just glad the market did not do what it did 2 times off huge surges last month and that is give it up big time the next day, even with Bernanke's potentially damaging words in the market.     The market hit some technical resistance on the SPX and NASD and we need to do some corrective trade after the latest rally and no matter how good earnings are as of yesterday, they too need to be taken in stride.    Also, many stocks here need to set up to go forward once again, so have some patiance.    Believe that these earning reports are in the back of the minds of Bulls and Bears as they possess the ammunition to go forward and they both know it.   The Bullets won't and can't be used up to blow forward now as we have the employment report on Friday and so we'd expect some subdued action today heading into it.    UBS hasn't helped this morning by D-grading CSCO, but this should be pushed under the rug soon enough. 

Yesterday was an oil/energy day ( RIG, CLB off list here) and this included the Solars moving which had a lot of company specific news as well.   We all know how deadly solars could be and after this recent run, we'd be careful chasing as there many more things out there we'd prefer to trade...the steels/coals are still cooking..X, AKS, CLF ...the RIMM types off our list

Even though we'll probably get some subdued and defensive trading before the employment report, it doesn't mean there won't be a 'pocket' of strength in some sector and that is what we'd concentrate on.

No biggie...

As brief as it was, market today did break through 12700 Dow and 1380 SPX.    We know from a while ago how powerful and how meaningful  these resistance levels are to traders and their psychology.     The fact traders were not seeing a significant follow through after we broke through caused a wave of profit taking.    In the big picture, this is ok and it's not a big deal that we didn't close near the high today.   In our opinion, there will be more attempts to break those levels in the coming days and one of those attempts will break it cleanly with a rush of buying.      Also, the first half hour of trading action from the resource based plays was just too crazy and difficult to hold onto thanks to a flurry of upgrades.  The gaps were gifts to take down positions.     

Lets take a look at a few sectors here...

Coals,  we have FDG, JRCC, a rejuvenated MEE, and WLT now as our main coal plays and all of them exhibited a similar trading pattern today.   They all broke to new high earlier before retreating later in the day.    The catalyst for profit taking was ACI's mid day guidance call and we think this one is nothing more than an excuse for profit taking.    In fact, we'd be ready the next day or two to pick up some shares back if opportunity comes.    Again, we like this sector very much as pricing power and demand is extremely favourable for the group.

Steels, even though most of them did not close anywhere near the high, the common theme is that most of them notched a new high intraday.   X, STLD,AKS, CLF (coal as well),  all hit new highs.   This is one powerful group and expectation is very high from the group.    We are still trading them aggressively but we reduced our position sizes quite a bit.    Basically, trading X at $140+ just isn't nearly as comfortable to us as trading it at around 115 when first introduced on DJIM.    There hasn't been any pullback for 6 or 7 trading days and from our past experience, we have to be cautious at this point.

Agri/Chem, this group also is trading near the high on the back of MON and MOS earning.   POT earning is toward the end of the month and we think there's still room left to trade.   We'd go aggressive on dips and light when chasing strength.  This has worked very well recently and we'd go back to this strategy.

Shippers, even though earnings is still quite some times away but we feel with the recent activity in resource sector, this group is getting more attractive by the day.    We still like DRYS (thanks Barrons for 4 point gap) the most with TBSI closely behind.    In this sector, it is not necessary to play all of the names, you just have to stick with the best one.  Also, as the steels, coals get upgraded, we think it is a matter of time before they start doing the same to the shippers.

Solars, today's the first day where the group is showing some weakness.   We'd be patient and will be looking to add little bits at a time over the next couple of days.   We are eyeing 9 ema as a possible point to rebound.  

Time after time, as much as we like to move away from the resource plays and into some more technology oriented and other eps related plays to take full advantage of this rally, we still can't help but notice that we end up going back into the resource plays as our biggest trades.     Seeing is believing, whatever gets the most attention these days also gets our biggest attention.    At the beginning of the year, we had a feeling that this might be the year of commodity for DJIM.   So far, it is turning exactly into that.

DJIM #16, 2008

Before you know it, we're here sitting at the high of 2008.   How'd that happen the Bear is left scratching his head!.  If you have really followed all of the news events up to now, things are still pretty much the same as at the beginning of the year.   We still have potentially more write downs from the financial sector and the economy is still in a recessionary mode and inflation worry keeps on making more noise by the week.     Yet,  we just finished the hottest trading week in 2008 so far and traders are more excited than ever to look for action in the coming weeks.    This is of course, assuming that you are trading on the long side of things.    So why isn't the market crashing given all of the negative news we had do endure the last few months?   We have already discussed this topic many times at length the past few weeks,  but we'll sum up the points again just in case you missed the various highlights.

The reason why we think this market has turned positive lately is as follows...

1. Commodity plays!   We think commodity plays are the #1 reason why this market just wouldn't be pulled down any further.   If you have followed our journal from the beginning of the year, you can tell how much emphasis we have put on the commodity sector.   Oil, Steel, Coal, Agri/Chem, Metals, Shipper, Solar... and all of them have provided leadership at one point or another for the hot money.    You can say this is the year of commodity and if you've only traded these from the long side as the premise has been here, you'd never have to care about anything else in this market.   We believe the collective bullishness among the various commodity plays are helping the sideline money to be busy at work.   Basically, as long as one's willing to commit capital into this market, it's just a matter of time before one's willing to "diversify" his/her portfolio.

2. Earnings!   At the beginning of the year, we all believed that a recession or at least a slowdown in growth is inevitable with our economy.   We just didn't know how bad things would get.   But, one thing we emphasized here is the market wouldn't get beaten down as we went into earnings.   It didn't, did it?   It is true that companies like GE and many financial companies don't give us a bright picture to look forward to, but we still have companies like IBM, INTC telling us that things don't look that bad.    Also, when you completely write off GOOG going into its earning, what you potentially get is an 80 point gainer day after it delivered a not so bad report and the $500 we said it would possibly hit off such.   So what it means is that not every company is going to be hurt badly by the slowing economy and when you cut a company's stock by 40%+ in as little as 3 months, you're only setting the stock up for positive surprises and therefore big moves.  This is simply what we are seeing!

3. Fed!    Mr. Bernanke and company mean business!   They have shown us that they'd do everything they can to protect the integrity of our capital system as hard as it might seem.   Even though the system needs lots of improvement and reform, it is just Not likely to fail under Mr. Bernanke's policy.    Let Bear Stearns be the first and last major victim from this financial crisis.   Basically, even as a trader who doesn't really have an opinion on how things should be run in the financial sector, the trader or anybody else doesn't want to see a failed system either.  It's in the best interest of all.

4. Idle Cash!    Basically, with the rates already so low and more rate cuts on the way, it's just absolutely ridiculous to keep your money in money market account or treasury.     When you take into account the potential inflation, it's even more pointless to keep your cash in cash.   So, money has to flow somewhere right?   We think so!   If you are afraid to invest in the banks, there's always one commodity sector that can attract your dough.    Now that some of the companies have reported some not so bad reports, there's even more reasons to get back into some selective plays in this market.

Now that we have listed these four major reasons why this market would not go down the last while, does it mean we can go back up and challenge last year's high?    At this point, we think it's not likely that we even have a shot to get back to last year's high.    For DJIM, we try not to look too far ahead of the curve and we try to take advantage of the current opportunities.  That's always the motto here, we let others worry about the consequences of this and that.   We're traders and we trade, it's quite simple.   It means that we play what's working NOW as opposed to what might work 2-3 months down the road.     By having an active watchlist, shadowlist at DJIM, where we constantly update the play selection through Alerts'Comments or daily Journal, we all should have a very good feel what this market wants and what it likes.     This is a pure game of psychology.   Knowing what other people want makes our trading decision a lot easier.     As is the case with DJIM in the past, we try to catch the obvious and easy plays.    Instead of figuring out what may work down the road or go nuts with charts,  we simply capitalize on what is working now.

Technically, we broke above major resistances on past Friday thanks to the Google report.    Since we are somewhat in unchartered territory, we now have to move our resistance level to the next stage.   The words Bull trap will be bellowed out now by the Bears, hey what choice do they have.    Bull trap or not, we've been enjoying a Bull run here at DJIM to get to this point to trap money in our pockets.     Dow 13000, SPX 1420 and NASD 2475 seem like a good area of resistance to us.    It is hard to say how fast or even if we'd get there, but we think the best opportunity for the market to get those levels is within next couple of weeks as the earnings keep hitting.    We feel we are currently in this earnings' "honey moon" period on the heels of Google, IBM and Intel reports, so now is the best time to take it higher.    In the coming week, we have quite a few interesting reports from commodity sectors we need to keep our eyes on.    Some of our favourite plays like FDG, AKS, POT... are all set to release reports in the coming week.   Also..with a good trading environment now, we may see momo money come back for those cheaper EPS play we all have enjoyed for years together.   So, let's all keep our eyes wide open for that potential coming to fruition.

A note on SOL!   We were anticipating an IBD100 inclusion last week on this play and it debut at #27 this weekend.    We really like this play at this point because of its recent momentum and now added IBD exposure.    If we get an IBD induced sell off in the coming days, we'd be almost surely buy that dip.   We already had one late last week to possibly take advantage of.    Based on its recent news events and the rosy outlook of solar sector, we think it has a lot more upside momentum to come.

If you think some of our hottest plays are extended, that's fine, we can always take profits right and move on.   Right now, we are about to be flooded with earnings this week and we're looking for fresh meat with possibly more upside potential than what we've already been extending for a few months.

Happy trading! 

...jus' like summer

Mondays trade resembled a summer's trading day.     Not only was the weather too hot where we are, but the volume on the indices was full of nothing but smog.    It was low and it might've taken a little effort for many to see through it and get a read.    After last week big gains, we were looking for some profit taking and corrective action to come in Monday, we'd have no problem with that!.   Instead what we got early was a nice report from ACI to help push all the other coals we've been covering here, most to NCH's( new closing highs)..JRCC, FDG, PCX, MEE, AKS, WLT.    In our view, this coal action was just a bonus following Fridays and an excuse to take some profits.    It's not a surprise to see great reports from this sec' this Q.    We've been buying this sectors stocks a lot on dips the past Q as they seem to provide some of the best around before making a nice recovery.     At this point with many reporting earnings, we were thinking we'd be getting this opportunity as they sell off on the news.     Unfortunately...the way they traded into the afternoon we were starting to think we'd sold too early this time around.     Considering, we began covering this sector when JRCC was in her low teens and yesterday hit high $25's, it is never a bad idea to sell a group and regroup.    The action in coals was in other commodity stocks as they all benefited from higher crude and metal prices, which offset the impact of weak financial stocks.     We did see pretty good action in the big 3, we trade here from the tech/internet sector, RIMM, AAPL,BIDU.     All in all, what seemed like lacklustre day too many a trader was nothing but as we all can see yesterday by the DJIM watchlist, shadowlist.   Those visiting DJIM can find the list on the next few pages of the Journal or a smaller favorites list just by looking at the Charts section where you find a few other stellars making NCH's,   CMP and V

Oh yeah let's not forget on of our most recent plays, SOL which had a great open climbing to almost $19 bucks.  Not bad for 5 days work from $14.   Again, keep looking to add and/or buy-back on dips as has been the strat.   As long as oil is roaring mad, solars should play along.

Some may have been upset we didn't get follow through gains after Friday, some on the other hand may have upset we didn't get a pullback. Even though we are expecting some sideways to consolidate the recent gains, a pullback would be welcomed here so we may pick up back some of our beloved.   But, by the looks of things a pullback is not going to include our niche of stocks anytime soon and so we maybe S.O.L!..lol.   In other words, in conclusion, we are pretty light as far as positions are concerned now,  but are itchy to start buying this market up once again!.