DJIM #19 2008

It is what it is!   Some market participants have chosen to cash out going into the summer.  You can blame AIG for the pressure on Friday, but what you really felt is that things will start to get slower from this point with volume marking one of the years lowest days.   In other words, we're not really worried about the market's performance/ declines last week, we think this is all the normal course after a significant breakout.   For those of us that love the market action more than any other gig, we are going to stick around low volume summer or not.    Simply put, this is where we belong!

Now that the earning season is over for big caps, what do we expect going forward?   Of course, we'll have quite a few small to mid cap companies reporting and we'll definitely keep an eye on any new opportunities.    Last week, we had some good reports from ANR, SNHY, MVL, PCLN, all should continue to provide nice tradable opportunities going forward.    As well, you can add ENER, MR to the DJIM shadowlist to go with the ANR SNHY MVL new entries.  As far as the big picture is concerned,  we are continuing to stick to the same theme.     This might sound boring that every week if not every day we have basically been talking about the same theme.    However, until the day this theme no longer works, this is the way it's going to be.    Right now, these commodity plays are just invincible.    Despite the fact that many of these commodity plays have ran up so much, there still seems to be more to come.

Coal, not only are most companies we follow are beating the current quarter handily, they all have indicated in one form or another that the demand for coal is only going to increase substantially for the next couple of years.   Some of the companies have already increased the pricing for their product and the pricing pressure is only going to get better.   If you compare this sector to other commodity sector, coal plays have ran up the least so we think this is the group with the safest upside potential.

Oil, nowadays, the talk is not if we will get to $150 Oi, l but when we'll get there.    You can't help thinking that if we have really entered a new inflationary era due to the ever increasing commodity prices.    Generally, consumers are wealthier now than 5, 10 years ago and this is especially true for those developing countries.    The demand for oil is definitely off balance these days because most of the crude was consumed by industrial countries a few years ago.    Nowadays, even the developing nations are fighting hard to secure new oil source.   We simply have to accept this as a fact and deal with it.   We like some of the oil plays especially when they were being sold off on minor pullback.  An exploration  play like BZP is in a perfect position and we'd expect in the weeks ahead for it to increase its reserves numbers which will push the stock higher.

Steel, have you noticed that despite the so so earning reports of some steel companies, they continue to make new highs on a weekly basis?    This is almost as if every commodity sector is tied together.   Raw material prices are going higher thanks to the recent years of global economic boom.    For those who have never been to the China or India or Dubai.. you'd have no idea how fast things change over there.   Steel companies have pricing power, period.    Again, same as the oil plays, a lot of the steel plays are prune to quick pullbacks and we'd love to do dip buying in this area.

Shippers, we believe it's entirely possible that these plays can eventually try for last year's high.   TBSI kicked off with a very good report and it was rewarded with some good reaction.    We feel the difference between trading the shippers this year compared to last year is that we are not afraid to buy on pullbacks this time around.

Solars, it is hard to believe,  but some of the solar plays have made new highs recently.    Not all solar plays are equal though, plays like SOL, CSIQ, FSLR, ENER are getting more momentum than others.    In the coming week, we have CSIQ and SOL reporting, so we'd keep an eye on these two's reaction.

Bottom line, besides the obvious commodity plays, this market still rewards those companies that achieve great earnings.    We have a handful of companies to work with on our watchlist and we have quite a few choices to work with on a daily basis.   If this market is going to behave the way we think it's going to behave this summer, this might just become one hot summer for all of us. 

A Defiant Market....

Even as bulls, we sometimes can't help but be amazed by the resilience of this market lately.     Just when you think the market is showing weakness and a potential rollover is in the works, you get this incredible support that simply pushes away any further declines.    The final score for the plays on our watchlist has been eerily similar the last little while.    No matter how volatile they trade intraday, the majority of them seem to turn green before the day is up.   Is this getting old?   We hope not!

We had a couple of reports which really set the tone today.    FLR, which was alerted last night, gave a total of 24 points, of which 17 or 18 points can be had if you bought some in AH last night.  Buying at the open would not have hurt either.   Keep in mind, FLR isn't exactly a small cap so by getting this kind of gain on a day is very noticeable.     On the small cap side wise, we have CSIQ , which had a very good report and stock is instantly rewarded with a gap up and strong intraday gain.    This is the one we noted to watch for earnings along with SOL (reports tomorrow AM).   Remember, SOL guided recently and that's why we played in the first place.  Will they raise '08 again?  Technically, CSIQ is probably the best solar stock out there among the smaller ones.    Even though today's finish isn't exactly grand, we still think there's definitely more to come from this one.    ENER, the recent solar addition had another great day.    At this point, we aren't sure at what price level this one is willing to settle and so letting it ride may be the best strategy.   To top off the solar sector, the big brother FSLR had a new closing high above $300.    This move is about as stealthy as it gets because most solar traders were probably dealing with CSIQ, SOL or ENER all day.

As far as commodity plays go, coal sector had a group move and many of our favourite notched new highs today,  ANR continues to blossom.  In terms of other plays, we bought some V toward the end for a rebound play here.    There's good odds that the low from two days ago will be held before we see a rebound.     MR also looks like it's ready to move higher after three days of consolidation from its initial earning pop.   So be ready to get this early DJIM gem back in your book.    If you recall, many of these earning plays don't finish after their initial pop.      Just about every earning play we encountered the last while moved significantly higher after the initial move so we are inclined to buy on dips right after the initial pop.    It worked great with V, SOHU, FSLR.. and pretty much every commodity play out there recently.

Bottom line, it is ok that the indices don't make weekly highs because as long as the sectors on your watchlist are in play, that's all we can ask for

CPI at 830am.