..Recycling...

Despite a weak report from Freddie, market held on strong on the heels of a 300 point gainer day ignoring the Freddie usual seen backlash.  Unfortunately, AIG's AH's report might be an excuse for some backlash.  As we said yesterday, now that we are back to the area where previous breakout attempt has failed, are we simply witnessing another head fake move?    It's possible that we stall right around here as we come to the resistance noted, but it's also possible that we make some noise and perform some unthinkable action, and that is rally to the upside for some late summer fun.  Hey, if Favre can end up a Jet, anything is possible!

One thing we have noticed or witnessed in the past few months, is that market cannot rally without the participation of the financials.    In fact, every big move in the past few months has been led by the financials.   Judging by this pattern, unless the financials, as a group, move 5 or 10% higher,  it is unlikely we'd get some meaningful action after this recent 300+ day.  It is hard to picture large cap techs act like a catalyst as they did today for an extended period.   However, we are noticing some of the popular names are being recycled right now and are being played potentially on a daily basis.   Stocks like RIMM alerted today and BIDU are some of the stronger names with an interesting setup.   Yes, it is boring to trade stocks on just the technicals,  but it does provide traders some incentives to sit through the day.

As far as commodity goes, whenever the storm finishes, you always seem to get a couple of sunny days.   We are not calling an upturn of the commodity sector here just yet, but $CRX bounced nicely and many of our shadowlisted stocks had a good day, especially in the morning.   We are simply pointing out here that whenever the oil is stabilizing, we'd have a pretty good probability of running up a few points from some of our favorite commodity plays.    One day at a time,  this is the mentality we have to remind ourselves to stick with.

EBIX, one of the best earning reports from a mid cap came from this thinly traded stock.  It's unfortunate it's so thin, but if you picked up even a few shares after our 'eye' alert August 1st, today was pay day.  It never hurts to get a some shares off a great report and just wait it out and sell into a substantial move or just hold on for an investment.

ICLR,  this stock was an original DJIM play, it manages clinical trials for drug and biotechs and is therefore in a pretty safe place for this market.  If you invest and than not just play fast stocks, than this stock like EBIX may fit into your book.  ICLR was $35 back when we went online, with no hiccups since, so you can see this has investment value besides a nice chart to possibly trade now.

...good enough..

Despite the DJIA falling as much as 100+ points off it's highs intra-day, we can't be disappointed in such action after last week's technical breakouts.  We've topped July's peak and think the best thing the market can do is consolidate in the near term before another push higher,  yesterdays reversals may be the start. 

In the meantime, our Shadowlist is slowly going through a transformation this month, a rotation as noted yesterday.." it's definitely worth looking at those small cap earnings and away from our commodity plays".  Our strategy is not about quantity, but quality,  we don't need a whole group or two such as \Ag's-coals etc to play now through August.   All we need is a few plays, here and there.   If you go look at the alerts this month so far, you can see you don't need much when you're selective!.   We've had ROCK, RIMM, ICLR, EBIX go about 10-20% in days, we hit a nice quick gap short in IPHS and an open alert for an early morning trade in GDP, ANSS for traders.   Nobody needs to catch'em all,  just a few of them with the right lots to make a nice return.   Hell, we've been picking our nose 5 days watching our old family member AFAM go from $36-44 off earnings in days without touching it sweetly.   Also, we've pointed out to keep stocks on a short leash,  this definitely applies when you get points like those from the above trades.  A short leash is not  purely for cutting a bad trade, it's for pocketing your earned cash.  Simply, we're not waiting to pocket too long, we pocket and than look for re-entry at this stage. 

We're not really concerned about what the indicies do here,  we can't control what is going on in the ' real world' with geo-political stuff, the Oil picture, the potential Financial surprises that can make this recent upside crumble in minutes.  But, as long as this rotation away from commodity plays on the strength of the dollar and oil slide continues, we actually welcome it as we go back to many of the DJIM basics as far as trading strategy goes.  This involves a good enough stock discovery, eyeing and/or getting in early enough to book some cash and than look for a healthy pullback to re-enter or enter for the first time, if you missed the first leg as in AFAM.