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Entries in $CRX CORRECTION (3)


Uglier than Betty...

There's no need to point the finger because it's pretty much one sided action today.    Action seen today is simply a "massacre"!    So yes, it's that ugly!     Unfortunately, there was really no warning to the extent, but the damage in shippers, solars and the other days Steel earnings 'cook in', were probably indicators more than we'd like to admit.   Even the early "Shale" excitement was pushed aside as collateral damage spread out into just about every part of the equity market by the afternoon.   Yes,  the "all mighty exuberance", should have been sold into considering the sickness seen in the market.    Almost nothing can withstand such selling, everything becomes vulnerable, especially any momentum...speculation plays.   Generally, we feel  people were dumping stuff indiscriminately before the long weekend, and perhaps, before the employment report tomorrow.   Some may blame the expected ECB hike or the weakness in coal price as the catalysts for the commodity selloff.    We think, regardless the reason, someone(s) out there were ready to dump lots of commodity related shares onto the market.   Is it profit taking or is it something else?.   We don't know because there's literally a million reason to sell a stock and we're not about investigate.   So in conclusion, commodity plays were taken down hard and if we remember correctly, this is the biggest single day carnage for CRX this year.  It closed at 918, our last note said,.."those dominos we speak of in full effect.", the CRX was around 955.   The " big way...domino effect including commods", noted yesterday came today.!  It was on the mind and unfortunately it happened.   Hopefully, we are all still standing!.    Action like today makes us weary to buy anything.   Traders may have an opportunity to trade Friday, others should just stay out!

As for the rest of the market, the story got uglier and helped push the commodity massacre.     This is the week we are supposed to wave our respective national flags to celebrate.   Instead, people are waving a white flag to this troubling stock market.    It's just very unsettling to see the broad market action,  even if we've stayed out of the trouble the entire year so far.

What is DJIM looking for at this moment?  A relaxing weekend...simply!.   We'll  look for any changes in sentiment toward the commodity sector next week,  Friday will be irrelevant in our minds.     Unfortunately, despite today's massive sell off,  we just can't draw a firm conclusion on the sector.    Until positive sentiment returns, we are calling this a severe correction for the commodity sector.    Sell offs like today take sometime to recover and before we even think about stepping back in, we need to see some stability first.

Tomorrow's employment report may be a catalyst in either direction and we'll watch for development closely as traders only.   We are most likely to stay very quiet the next couple of trading days.


What's to like?

..Nothing really!   What's not to like?....   Just about everything after the wide commodity sell-off ($CRX -4.3%).  Once July's lows support around 850 was broken it was an easy slide to 823.  The $CRX break preceded the big oil late morning plunge. 

Sometimes we just don't want to be this gloomy on the market.    There's always seemed to be some kind of silver lining that's keeping us the traders come in every morning to do our work.     Occasionally, and really very seldom, we have this kind of market where nothing seems to work.     Trading strategies, none that we know, can apply to this particular kind of market.    Basically, when we as traders run out of trading ideas, we simply just sit and watch.    The worst thing that can happen to a seasoned trader, is to become creative and experimenting new things when the trading environment is downright hopeless.

Okay, maybe we've been a little tilted toward commodity plays in the last little while.    However, now that the commodity groups are in the apparent down spiral action, it still doesn't give us any comfort to step into any other group.  Something had to give this week and unfortunately, the only group that had the earning potential to lead, crumbled!.  The word today was liquidation by a large commodity hedgie, add the sudden dip in oil and we had a waterfall.   Ironically, this happened on the 2nd trading of the month, just like in the July burst.    Commodity groups are down recently due to the overheated action since the beginning of this year.  The earnings have just been a reason to sell off.   While this is tottaly understandable, we still have to remain vigilant in tracking this group for near term potential.     Volatility is at an extreme level with the commodity group as momentum money leaves, so we'd either play extremely small or not play the group at all.    As we have been saying in the past few journals, forget about building any positions in any stocks right now.  It's useless.    The trading theme these days is nothing but a few chase of top gainers here and there.    Earnings play in the broader market, up to this point are a huge disappointment.  The fact the broad market had a steep decline today while Oil plunged is not very comforting because we've always rallied as this occurs.  Tuesday we have FOMC decision/statement and CSCO's earnings to potentially lead us back to July's lows.

Who do you put the blame on?   The hedgies?  The speculators?    We think this is what it is.    We are currently in a tough economic and trading environment and we just started the toughest trading month of the year.     When you pile all of the recent events together, there's really nothing anyone should look forward to the next three to four weeks out.      Right now, as a trader, less is better.     The less trading you do, the more likelihood that you are going to outperform.     Is this going to be a trend forever?   Fortunately no!    

For now, just relax and be entertained by this market.    This is the time every trader should know his/her limits and be honest with themselves.



Surprise!!, we're back to picking on the financials today.   Actually, we're not the ones who started it or followed.  In our view, the main culprit was a Deutsche analyst and we just waited out the day waiting for this to kick in.   The same analyst recently got the market going on July 23rd, we noted in the next days Journal...."Yesterdays, late day was ignited by an influential Deutsche bank analyst who said his bearishness on the banking was reduced over the past week.    "Bad results are good when expectations are so low", he said.   Seems he had a change of heart and picked on the biggest fish downgrading GS to hold.   It wasn't JPM small loss this Q, or Oppy's analyst who is constantly hacking at the firms, or Bove's late day estimate cut on JPM that ruined the day.   These were just filings to the most influential banking analysts words on GS.

Can this market be more original than this?   Naturally, after many days of relentless selling, commodity plays got a break today even with a stronger dollar day and got into green for the most part.

Something has to be worth playing in this sort of market, right?   Yes, it’s time to move away from the mainstream names. As we mentioned yesterday, our Shadowlist has been going through a “change in direction”, sort of!    Okay, we still have the POT, MEE, CLF,GDP to fill up few spots as they are pretty representative of their respective sector.    In essence, unless something big and dramatic happens in the commodity area, we are most likely going to stay away from the sector for a while.    We hate to say it, but in case you haven’t gotten the message the last couple of weeks, “the commodity run is over”

Instead,  slowly but surely, there are more “obscure names” creeping onto our Shadowlist.   You want to know the reason? Take a look at the recent 52 week high list, and you’d swear that you haven’t heard or seen 70%+ of the names.  This is just fine with us.   With the trading business, moving on to new stocks and leaving old ones behind isn’t exactly shocking.  What we have been doing the last couple of days, is taking notice of those names that are making new highs/or about to off the back of their earnings reports.    Believe us, there’s quite a few out there.     However, we can’t play them all, nor do we want to.   So hopefully, we'll stick to the ones we think have the best potential in terms of upside, liquidity and potential longevity.  The last is the most difficult to deal with.

A few names we track are behaving a little different from one to another.    After a few days of run-up, AFAM finally came down hard on heavy trading.   We couldn't see a reason for the hard sell and it's not surprising it stopped near its 9 ema.   When it's not clear as to the reason, it is best to see the stock stabilizing before entering.   FSYS, on the other hand, is just refusing to give anyone a decent price to get into.    For now, we’d simply want to be a little patient on this one.   ROCK is stalling a little and we’d see how much it will give back before we start putting back in our bids.   If you see a stock like AFAM stall after a run as it did on Monday and than follow up with a drop, you now know it may be reason enough to give up your ROCK as it stalls for the time being.   As we said yesterday, pocket your earned cash and wait for another entry in this environment or at least size down..

Bottom line, it may be attempting to jump back into some commodity plays for a quick point or two, but you still have to be crystal clear on the trend these plays are in.  Right now, commodity plays are on a pretty severe downtrend and if you happen to make a mistake, it will get you.  On the other hand, with the plays making new 52 week high off the eps reports, clearly, they are on the uptrend.  Don't forget our early earnings plays this Q,  ILMN might be next in line to do what AXYS did late in the day.