Spring Training...

Kinda felt like a lazy Spring Training game in Florida took itself to Wall Street today.  Nothing except da' boys playing catch today, back and forth till a half hearted swoon end of day.   Even the Bears couldn't be to thrilled by this triple digit loss on the lightest volume of the week, hey even in the middle innings today the Bulls almost turfed some green on them.   Must be pretty disappointing after fielding this line up card today....

Batting 1st:  A pullback was in the cards after 4 straight days made the market indices extended   2nd- GDP below consensus     3rd- Initial claims higher    4th- Benny talking of small bank failures  5th- Moody's headlines on regional banks  6th- Financials beaten all day(XLF -3.4%)    7th- Oil breaking out from its recent consolidation   7th -Commodities booming after a day off    8th-  US dollar at all time lows.  9th-, not sure what 9 was, but if you're going to rely on the 9th place hitter to hit one out of the park, you're in trouble!...You'd figure the Bulls had their doped up "Ace" on the mound to fend of this potent line up, but there really wasn't one!.     Don't tell us it was that Texas Ranger, George W. Bush claiming 'there will be no recession'..  talk about knuckle balls being thrown out by a knuckle head!

Anyways, it was a quiet premarket and as it turned out tossing out a few balls to hit before the open was the way to play out the game today.  So, instead of dwelling on today's overall market sentiment and what the last of the month might hold, we'll introduce or as re-introduce a few of the home runs today.

EOG, this O & G play just smelled of PBR that we traded here as soon as the news was released before their investor conference.   They announced 4 new plays with meaningful potential and also increased their Barnett gas play potential.   Poor Citigroup just downgraded it this week.    Basically, the Barnett play was this stocks growth at 5.0-7.2 tcfe's after today's increase.   To put it in perspective,  these 4 new plays carry mid potential of 8.5.   We don't need to know what tcfe's are all about, just that these finds are a greater # and the stock already traded over $100 based on mainly Barnett.  We're sure this will be around here as long as oil is gushing over $100. 

HURC,  guess most members that have been with us recall this play creeping in almost every Q after earnings the past few years.  After a few Q's off it reported a stellar Q today with what looked like record revenues and EPS.   Even though this was helped by way of dollar exchange, it still managed to hold its big gap and actually make another move late in the day.   It was a bit surprising as EPS stocks are just not running so far in this environment.   Having experienced this stock more than once, we'd wait for it to come back before considering further.

GTLS, (LNG) was a big play here last summer and its good to see it still is on radar of DJIM's bullpen. (sorry Mark..couldn't resist).  As we said this morning, it's not really about the EPS as the reason to chase, but possibly the combo of a decent report and the sector its in.   A CC is worth waiting for or at least trading into if you see a good reaction and then getting out as the call begins before evaluating if you should re-enter or just enter for the first time after the call.  Besides,  it is really hard to get a grip on earnings this Q and what will react in a positive manner.  You could see a blowout headline a la DECK this evening, yet by missing a detail in the actual report you could be in big trouble chasing at the crack of the bat.   It's really a crap shoot with earnings, a lot of things need to come together to get a reaction like HURC's/ GTLS today.   Just like HURC, lets keep them around and watch for them to come off these extended 1st day reactions.  We're not in a market where you want to hold on too long yet.    So, if you made it into these plays today,  it is best to pocket gains and be glad you had it on watch before most.    If they are really this good, we'll get around to them again.

Friday might come down to whoever has the biggest paint brush to close off the monthly on the charts.  As of yesterdays close (27th), the DJIA was up 1.7%,  SPX up 1.3% and the NASD was down -0.2% for the month.  After today, it looks more of a wash of a month.  Amazing, all things considered we've had to put up with.

Halt rally...

Quite fitting we had a Halt Rally to +150 on the DJIA considering we've speculated on Half Ass Rallies more than once the past few weeks off the ABK/MBI turmoil. The last 48 hours played out as we noted intraday with the shorts covering into the last hour on Tuesday to avoid being caught in the news of a ABK rescue and then the quick tick up as soon as ABK was halted followed by the sell off of about 200 points as reality set in.  A 1-2-3 shuffle that is no different than what we see in the markets on individual stocks as they move into an earnings report and then sell off.  Trading is a game of human nature and it is prudent to have some street smarts and try to think how the herd will react in order to be on the frontline and not be followers.   The difference comes in the form of dollars and that is why we are here, to make money and not lose it.   Not to be beat a dead horse without a white knight to bail it out, we are left thinking ahead and wonder what promise lies ahead for the market to move forward now that half ass rallies will stop on the monolines soap opera.   Now the Bulls are left wondering what bailout will come for them without these rallies to save the downticks into the pit!.   The tide has probably turned and if there is news on the monolines it will probably be negative, so we have to be prepared. 

Underlying all the ABK hype was what matters and that was the action in commodities and the stocks involved.   The melt up action rejuvenated overnight after a substantial down day as new highs were made all over the place.    Based on this action and on the decent last 10 minute close, we'd be looking to see which commod' will make the best trade of the day very early.  We wouldn't be afraid to jump in early today unless we get some bad headline in the pre market.   The market may will feel a sigh of relief today and just go after what is working in the commodities, in case it does we'd play the below.  

If its coals, we'd look early to FDG as it did not wilt under a downgrade, AKS, JRCC follow.

If its O & G's, we have BZP, EOG, CLHB and FLS potential 9ema'er rebounder.

If its Agri-chemicals, we'd add early to CMP as it made it back to NCH levels and then deal with usual suspects..POT, MOS

If its metals, we have to look at MTL and CLF

If its none of these, we'd stay away heading into Fridays jobs report and read the Ambac prospectus to kill time...okay maybe not.

Shifting Focus...

In a way, this market is getting extremely difficult to lean heavy in one direction at any point.    Even if you are a super bear, and with every economic indicator going your way, you still want to arm yourself with enough hedge to deal with a day like today.     This market started off just as everyone suspected but the turn of events in the afternoon astonishes even the most optimistic bulls.    Did it really matter what S&P said in the morning with regard to the conclusion of writedowns from major financial institutions or the housing rescue plan?    We think the market rallied because a lot of people believe that our Fed. will do anything creative to keep this market afloat, while delaying the inevitable indefinitely.     Of course, any policy announcement by Fed these days is greeted with warm welcome.   We just had a super 200 billion "cash for trash" injection announcement and now people are asking for more, at least they are hoping so.

More importantly, we have to understand why we gapped down earlier in the first place.    Perhaps our market here is solely focused on subprime and credit crunch crisis the last couple of days, while the rest of the world is however, only focusing on the weakness of the U.S. dollar and the strength of Gold/Oil.    The weakness of U.S. dollar basically hurts all those countries who export a great deal of stuff to America, which is just about everybody.    The high oil is also increasing the cost of doing business because a high percentage of fixed cost in transporting goods is the fuel.  With the dollar getting trashed, as traders, the only protection and hedge we can use is to buy gold and other base metals.     All of these factors are creating what we call an inflation environment here.     This is still in addition to the credit crunch crisis we are dealing with here that is still months away from being resolved, in our opinion.     The more Fed tries to save the capital market by boosting up the lending programs and lowering the rate, the worse it gets with the inflation as traders use every Fed policy to sell the dollar off, hard!

Fed right now is in a very difficult position as on one hand, they want to stop the bleeding in the financial market.    You have to give Fed credit these days as both the surprise rate cut back in Jan. and the recent 200 billion lending program came when the market is about to break new lows.  Basically, it feels that there must be a chartist out there working for the Fed to try to kill the bears in a timely fashion.     Oh yes, we forgot that this is an election year too.   The last thing Fed or the government wants is a financial market in total disarray going into the election.     This may sound like a conspiracy theory but you just have to admit the impeccable timing of both Fed's announcement the last two months.

Now that we know Fed can and will rescue the financial market, is there anything they can do about this inflation or the recession we are facing?   Absolutely nothing we think.    Both the inflation and recession are part of the economic cycle and it just takes time to get through them.    However, now that the Fed has signaled their intention with the financial market, the focus will be on recession and inflation going forward.    This is why we think the volatility of the market lately is the result of crosswind between Fed and economic events.    To sum it up, people are buying this market because of the endless bailout attempts from Fed while people are also selling at the same time because of the poor economic indicator which points to both a recessionary and inflationary environment.

With DJIM, we'd keep monitoring any ongoing events while keeping score of which sectors are getting bid up and which sectors are getting sold during this volatility.     Looking at today, Oil , Agri/Chem, Steel and base metal were all getting bid up aggressively.  

Just to highlight some of our favourite buy on dips play here, we like Oil stuff such as EOG BZP HES, Agri/Chem POT MOS CF, MTL CLF X STLD from the steel sector.  

On the short side, we still like the idea of shorting tech, shippers and solars on strengh only when fading the move.

Going into the trading day, the focus will rest solely on CPI and inflation.  The market seemed to have a memory lapse going into it.

A welcomed pullback...

We are glad that the indices pulled back 'some'.   It definitely takes some heat away off the overextended rally we've wanted to avoid.    Oracle's earning tonight isn't too inspiring and coupled with the always potential negative economic reports, we may see some further pullback.  This is all good news in the grand scheme of things.   One thing we may simply see Thursday is a disconnect between the DJIA and NASD off ORCL, if ECO data doesn't hurt the whole market.      The reason we keep saying this 'good' is that the further away we are from 12700 Dow and 1380 SPX, the less pressure it is to buy on the dip.     Market is actually in an interesting juncture here because we think it would take a lot of negative headlines to push this market below last week's low, which is still 700 points away for the Dow and 65 points away for the SPX.     That is a lot of ground to cover which means the chance of it happening within the next little while is slim unless something dramatic happens.  Oracle is not dramatic.

The thesis of DJIM here, is to buy on weakness while trimming some off on strength.    Unfortunately, the trouble we are having lately when it comes to work this thesis out is the fact MOST if not all of our favourite plays just refuse to come down this week.    If you look at today, and from the watchlist which we posted over the weekend, over three quarter of the plays still ended up green!   Takeaway the banks, which is something you can't play every day and the list is looking even better.   This is actually in fact scary because you can't imagine what can possibly happen to these plays if we are up triple digits.

What can we do?   Basically, not having any positions in your account while watching some of these plays like X, CLF, EOG, BZP, RIMM, AAPL... rocketing away in a down day is simply, unsettling.    So, at any time, we'd at least carry 100 or 200 shares of each just in case we have a type of day like today.     Honestly, without looking at the final box score, we really couldn't tell if we had a bad day simply by looking at our primary watchlist.

To review some action here...

Oil, today's surge in crude price not only broke the short term down trend, but it feels it has legs to challenge its recent high.    This is shown in pretty much all of our oil plays here.     We like EOG, BZP and HES the most as they are pure play here.    BZP also has a fresh breakout and notched a new closing high, the technical looks very good on that one.    RIG is another one we are now watching in addition to the above ones.

Steel,  this is the group which we are currently in a love/hate relationship.   We love it because it is the absolutely best performing group out there.    We hate it because we simply don't own enough of their shares and there has been literally no dip opportunity to add in the past few days.     This is really a pity because the higher it goes without any pullback, the more likelihood we wouldn't buy on its first dip.    In the group, we like X, CLF and STLD the best but just about every other name is also kicking in the sector.  This is the one sec you've noticed we've stuck with as the commoditity crunch came last week and our most mentioned X is becoming a darling with CNBC talking heads and last night it was Cramer pet rock.  Hopefully that doesnt ruin the group.

Agri/Chem,  as early as this Monday, we even had the idea of shorting this group as the technical picture just looked downright awful for the group.   However, one pre-announcement from MON changed all that.    The sentiment is again that this whole group will crush the number and guide higher.    We'd be very aggressive in buying any dips in this group including MON MOS CF and POT.    However, as most of you have noticed, there really isn't any dips offered in this group in the past couple of days so in a way we are kind of hoping market pulls back some again tomorrow.

Shippers, this is another area which we are taking some interest lately as the prior downtrend seemed to be over.    We aren't being aggressive in buying up the strengh last couple of days but we are rather taking opportunities to add when they get sold off along side the market.    We like DRYS the most but we also have EXM TBSI on the watchlist.  GNK another we may consider that's been here before if the sector runs and you want to purge.

Solars, this group has take on some very nice gains the last few days and we couldn't help but wonder how much further it can continue up.   The only play in the group that really interests us is FSLR so when it stops going up, we generally just wait and see what happens next with the group.

Techs,  not all technology stocks are the same and it pays to follow what is going on in the market right now.    We are staying away from the internet group in general except for an occasional intraday flip from the likes of BIDU and GOOG.    We'd be playing some RIMM/AAPL but feel the recent surge in price has been too much too fast.    RIMM's eps is only four trading days away so it's best to take it lightly at this point.

Other than the plays above, we also have ISRG, V... FDG JRCC (Coal plays), AEM (gold) that are performing well in this market.     In addition, it's getting closer that we can also give GS MS type a try on any further pullback.    Bottom line, we have some economic reports tomorrow that could give this market some cause to move and if some of our favourite plays pullback (keep our fingers crossed), we'd be there to lineup the bids.   Keep in mind, nothing is for certain in this market so we'd keep our sizes relatively small and spread out the purchase just to be conservative.   Lots of names in bold here, but that's simply because things are working off the list.

Primary Watchlist

Snapshot of platforms primary trade list at close Friday.

AAPL          153.29      +1.68             +1.11              30,527,900  
AEM           70.44       +2.42             +3.56              2,151,700   
AKS           61.11       +0.91             +1.51              2,762,400   
BIDU          293.60      +6.96             +2.43              7,999,900   
BZP           19.02       -1.46             -7.13              1,626,600   
CF            123.21      +8.66             +7.56              3,985,300   
CLB           129.00      +1.85             +1.45              202,200     
CLF           137.33      +4.59             +3.46              1,529,600   
CLHB          63.31       +1.31             +2.11              330,400     
CMP           68.00       +3.95             +6.17              1,402,000   
CSX           56.90       -1.76             -3.00              5,374,600   
DRYS          66.25       +2.15             +3.35              3,494,500   
EOG           124.32      +2.88             +2.37              1,928,000   
FDG           57.70       +1.70             +3.04              2,796,400   
FLS           110.79      +1.37             +1.25              1,075,900   
FSLR          278.70      +27.10            +10.77             12,014,000  
FMCN           40.31     +1.56                                      3, 496,100

GLD           90.27       +0.85             +0.95              7,228,200   
GS            176.00      -0.53             -0.30              8,500,200   
GU            15.45       +0.46             +3.07              1,879,900   
ISRG          336.40      -0.59             -0.17              828,400     
IWM           71.43       +0.28             +0.39              61,536,000  
JLL           82.92       -1.54             -1.82              424,800     
JRCC          19.57       +0.34             +1.77              1,222,600   
JST           33.00       +3.00             +10.00             311,500     
LNN           110.64      +0.93             +0.84              534,500     
MA            228.05      -3.20             -1.38              1,952,500   
MELI          42.75       +3.11             +7.85              2,068,700   
MON           119.01      +1.22             +1.04              7,330,400   
MOS           115.70      +11.18            +10.70             14,330,800  
MTL           133.43      +3.42             +2.63              900,300     
POT           171.12      +3.45             +2.06              9,341,800   
RIG           144.15      +3.77             +2.69              7,897,100   
RIMM          120.12      -2.46             -2.01              24,431,500  
SPWR          90.40       +8.39             +10.23             6,129,800   
SPY           137.04      0.00              +0.00              204,473,000 
STLD          35.95       +1.65             +4.81              5,689,300   
SWC           17.12       +0.81             +4.95              2,360,500   
TBSI          33.35       +0.07             +0.21              429,400     
V             64.12       -1.38             -2.11              9,099,000   
WLT           69.66       +0.58             +0.84              3,094,800   
X             140.62      +2.71             +1.96              5,645,600   

Slow things down a bit....

Basically, as much as we'd like to see 200+ pt gain every day, the best course of action for this market at the moment is to chill.     Yes, we have broken that all important resistance level last Friday and now comes the task of defending that level as support.    Because we are still in the midst of an earning period, the market will tend to be volatile because of the uncertain outcome of earning reports.    We'd allow this market to go 100 points either way, as long as there is strength in selected plays.    We cannot control nor predict whether a market will go up or down 100 points tomorrow, but we can definitely take advantage of opportunities that are presented to us.    This is assuming that we are on top of our game and know exactly what to look for.

Today's slide is mainly from the technology area and we aren't particularity concerned about that.    Yes, some of the tech names have gone up tremendously ahead of their earnings and it's only natural to see some pullback.    Frankly, if AAPL's earning suck tomorrow, nobody wants to pay $150+ for it.  It's as simple as that!.  On the other hand, the commodity market is still alive and kicking.   What else is new eh?    Honestly, this is getting to a point where we don't even care about any sector other than the commodity ones we've been stalking.     It's not that the commodity plays go up the way like in the dotcom days.   It's the fact of how scarily steady they go up with respect to the overall market.    It doesn't seem matter whether we have a down market or an up market, there's always one area of the commodity market that's getting hot money.    In today's case, we have oil and agri. and shippers and a selected steel MTL, we long ago said might follow in the footsteps of our big play (X) when it dipped into $110's.   To us, that's more than half of the plays on our watchlist, your DJIM shadowlist.    To some, this may get frustrating as the inevitable question arises "why don't some of these names pullback for once?"     Well, this is the perfect illustration of hot money flows.    Is this going to be a bubble waiting to be burst?    Frankly, we don't know and we don't care at this point.  They blew it up once recently and we came back and said this is not 'dead' and soon after it all started up again!.   Only thing we have to say at this point is that, if you don't trade the commodity this year, you will be greatly under performing those who do.

Now some sector digestion in no particular order...

Oil, it sure is getting hotter out there and we are not even through April yet.   What ever happened to spring?   We literally jumped from freezing temperature to mid 20s C in a matter of a week.    This can also illustrate the market with oil right now.    It just feels like there's no stoppage, now that the summer is coming, which is seasonally strong for oil price.    As far as plays wise, we are sticking with some of our popular ones like HES, EOG, RIG, XCO, ATLS and BZP.   

Coal, with earning reports out of the way from BTU ACI and FDG.  We only have a couple of interesting ones left to report.    We are looking to establish some good positions next few days hopefully on dips.    The story with this sector is again demand + pricing power.   The current reports may not justify the future potential of this sector.

Shippers,  just about every shipper had a good day today and this is more of a recent sector move than anything.   We started getting very bullish on this sector at the beginning of April and it's been paying off nicely so far.   This is a secondary play for the commodity market, but it's a very important sector.    Basically, you have only so many vessels and you can only built so many of them a year.   The rising demand of commodity will give those shippers good bargaining power down the road.    Most of these shippers are already trading at a very low P/E so now it's the matter of change in perception as far as trading goes.    DRYS, EXM and TBSI are of course our three top dogs we like to trade and we'd stick to them for the next while.   We rode them last summer after alerting the sector and we are once again since the start of April.  If you're visiting DJIM, you can go to our Alerts-page and /or search our stocks through our search of Journal entries, or just keep scrolling down these pages and see the stocks we've been playing highlighted in bold.

Agri.,  about a year go, not many people have even heard of POT.   These days, you can't log into a trading system without at least checking to see how much POT is going for on the street.   How ironic, eh?    The success with POT has everything to do with how huge the IPO of IPI was today.    IPI is a pure potassium play that markets its product to America.   Given the scarcity of this resource and the increasing demand of this ingredient in food planting, IPI will likely get some more momentum down the road.   POT is reporting on 24th and we think both the report and guidance will be good.    It's hard to say how these stocks will react initially, but we'd be buying/ recycling on any weakness.

Bottom line, it pays to go after the obvious and easy plays.    In a bull market, every play will look extended and that's the way it's going to be.   This is the case with commodity plays right now.    We have to constantly remind ourselves that this is where the hot money is and this is where we want to trade.