DJIM #5 2008

A week of the improbable just passed.  We had FED slash and slash in attempts to stimulate the economy and at first it didn't seem stimulate a trader in sight.   A put or shut up sign was put up and come Thursday the traders showed signs of being inspired to put money in the markets and off the sidelines.    Speaking of sidelines, the NY Giants came off theirs late in the game and concluded a historic week with an improbable comeback upset.   Now if only the Giants can become the poster boys for the Bulls and push their own form of resistance out of the way and continue the bear market rally.   The resistance is in the charts coming up to the break down points as of Fridays close following a disappointing negative Payroll number but positive M&A noise...btw a number that 80 of 80 economists missed..the negative part.   The market is becoming more and more resilient to economic bombs and that's great, but it needs to continue to brush off the newest kid on the block ...the insurers and their crisis.    Hey, if the Giants can do it, a market can be full of surprises and play out in not so obvious ways.   Even if we retreat some off these technical levels, it does not mean we are going down to test lows again.   As far as trading strat',  we'd just prefer to lighten up as we did Friday and would today on any move upwards today into the levels noted yesterday.    Simply, we may break through to the upside at some point, but there may be no catalyst this week to accomplish this it seems.    Maybe some M& A activity will be spurred by the MSFT-YHOO bid.    This is already helping the public sentiment that stocks are cheap.   The next best thing is we begin to consolidate these recent gains.   In the meantime,  we can go on watching the second month of earnings unfold and concentrate on potential surprises.   The second month of earnings is the time the smaller companies release reports and so we'll look out for a surprise or two from an unknown play.  Now that money is seemingly coming off the sidelines,  the herd mentality might start to trickle in.  What we mean by this is we finally might get some runners as the hedgies come off the sidelines too and help run the little stocks that might surprise.   Nobody wants to be left out in the cold if the market has bottomed, even if it is possibly only for the short term.

It's 2008 and reliance on the stocks of 2007 is probably not the best thing to wait on.    We all get into habits and one is concentrating on the past winners to do it again.   Have an open mind at this stage, new winners, new sectors may emerge that may be in play the rest of the year..  In respect to this, we are heading into this week with a new sector we will closely watch...

COAL stocks, back in the summer we issued an alert on Shippers. At the time, the only chart making a new high was the BDI.  We went with it and the rest is history.  Today a new high is being reached in the price of coal, yep the boring black and sooty is making new highs. There is a huge demand for American coal, the terminals can't keep up to the surge and this won't stop in the near term.   What we need to see is traders looking for the next white hot sector flock here and this won't happen overnight, but if we stick it on watch and make some trades early we'll be a head of the curve.  Some of the stocks to follow include, FDG ARLP ACI NRP CLF CNX YZC WLB WLT ICO NCOC...It is hard to tell how much of the run was just the bounce in the market and how much was this play catching on last week.  A dip is probably the best time to start getting in on this, but if the game is on... we may start playing soon.

We also have ADM earnings Monday morning, depending on the report and CC, we may see this act as a catalyst for our Ag stocks, MOS POT

..Kiss of death

Okay..it wasn't that bad, but Batman And Robin testifying did enough to rehash slowdown concerns and consequently bring a big red day on Valentines day.  Red..how fitting!.  The duo did not rile up any new concerns, but after being up 4 of 5 last days on Nasd and 3 straight on DJIA/SPX, it was probably inevitable we have a pullback.    Unfortunately,  it doesn't look good when the only real gains came on Wednesday get grinded down almost in full the next day.    Simply... if you've got financials and tech leaning to the downside, your hands are tied and the outcome is predictable.     So...now heading into a 3 day weekend,  we are left with options expiration day to deal with and it's probable volatility and the usual Friday profit taking.  On the hand, maybe we got that out of the way yesterday and the Buls and Bears can just fight the 12400 and the SPX 1351 and let the market go into the weekend in some kind of peace.    Anyways...not to dwell on the big picture as it drives us all bonkers, lets deal with possible trading opp's for Friday considering our emphasis is on EPS trading and we have a few reports to potentially trade...

DRYS,  you gotta love a headline of a .47 beat, it sounds wonderful doesn't it!..One thing never to forget is to put this in balance. What we mean is this is a only a 10% beat and you have to consider what comes up on the CC as this co' doesn't  headline guide.   The company seems optimistic heading forward, but that we get from the report headlines and will let the market decipher early on if we want to play.  One thing we also need to watch is the BDI in the next few days because it has the tendency to go up 3-4 days straight days and then do same thing down.   Now it has been up 6 straight days and is up against the 200sma day.   Unless there is exuberance that you can swing a trade intraday today, we'd probably hold off holding these into the weekend.   One shipper that we have added to our watchlist is GNK after its report.  Many good things in its report and it is probably much better for those that want to avoid the volatility of the 3 main shippers we've traded here..DRYS, TBSI, EXM.

CMG, one of the big momo stocks of '07 became one the biggest short % stocks as well.  This provides a potential squeeze opp' at any time following the beating it took AH.  Look to maybe flip this today.   CLB followed by FTI could be potential early on trades with less volatility.

Amongst the beating yesterday what survived were the coal stocks.  Most strength was in the 2 big names we like FDG and MEE, which closed near high of days.    The cheapie covered here is JRCC and hit a high of 17.80 intraday high.  At this point with the markets the way they are we'd rather play the more liquid names with their institutional money.   A potential pisser today is some tier1 firm has downgraded the group.  If traders takes this seriously, we'd seriously look to add on the dip as earlier in the week

We've had a few nice EPS names going strong the last few days toying with highs.  CMP, ILMN, FLS.  The thing is this market wastes no time in taking away profits and it is very hard to even hold names like these through.  This is something we all deal with and should decide after DD if these plays are worth holding longer term, no matter the daily swings.    If you have the patience than you see this has been rewarding after introduction here.

DJIM #7 2008

It's just simply getting very technical out there.   Although headline news may dominate the movement of a particular trading day,  the overall movement of this market is becoming more range bound with the underlying downward bias still holding.    Things are tightening up on the technical side and we feel a move is coming sooner or later to break the latest range.   The more likely scenario recently has been a break to the downside and a test of last week's low just under 12100.   However, we may get some surprises judging from the futures trading at the current moment that coincides nicely with Fridays reversal led by financials after a BBY warning and weaker NY Empire number, Michigan sentiment.  Is the market starting to price in some of the bad Eco data?.  Well, we'll definitely know after this weeks data. http://www.nasdaq.com/econoday/calendar/US/EN/New_York/year/2008/month/02/day/18/daily/index.html

Quite a few earning reports and some economic news dominated the pace of trading last week.   Even in this recession fearing trading environment, we still have market participants speculating on earnings reports/guidance to the long side.  BIDU FSLR PCLN and even the CMG, we noted before the Friday open as a possible trade after the initial sell off.   This goes to show that speculation money is still out there.    This is definitely good news if your trading time horizon is no more than a couple of days at a time and you don't swing with huge bets.   After all, this market is only rewarding those with a quick trigger and a neutral mentality.

At DJIM, we are sticking with our recent theme of "long the good eps winner on weakness and short the crappy plays on strength".    Fading the strong market move in either direction until a major trendline gets broken should remain the theme.    Basically, this market has been trading between 12200 and 12700 over the last three and half weeks and we feel one of those level will get broken eventually.  The SPX is about mid point in a narrowing range for the last 17 trading days since Jan lows. 

For now, we are trading both sides of the market so we don't get completely left out when a strong move occurs in either direction .    What we aren't willing to do at this moment, is to commit large amount of capital to bet on any one direction.    If you want to minimize risk in this kind of environment, you just have to accept the fact that you have to churn to make a living at this point.

Chemical/Agri.  the reason we keep mentioning this group on a daily basis the last while is the fact this is one of the few sectors that is still trading near its 52 week high range.    With some names trading at a very decent P/E and a majority forecast of strong growth the next couple of years, we'd still be pounding on the long side of this group when opportunity presents itself.    You really don't have to trade every single name of the group, but to trade the ones that represent the sector best like POT MOS MON CF etc.

Solars, we'd remain very selective in this sector and pretty much stick to the saying "what's good for FSLR is only good for FSLR".    Trading a solar play that has a great outlook is less risky than trading those that don't.    If you are long those solar names that were being dumped on their earnings report, you'd likely suffer more pain once the sector pulls back meaningfully.  Citgroup upped a German solar to BUY giving a favourable outlook on the sector today.

Coals , just like we said the GS downgrade could play havoc and also produce more opp's to buy the dip.  Some like ACI, MEE took it on the chin, well actually it was a low blow. We all know most stocks in a particular sector, even if not included by name in a downgrade suffer. One that did not is FDG.  After trading it here now for a few weeks, we'd have to say there is more involved here, as in strategic possibilities.  We'd stick to FDG , MEE and JRCC for a more volatile cheaper play.

Shippers, the recent surge in DBI index, as well as earning anticipation have caused many popular names in the group to move a substantial amount off their recent lows.   After a couple of key name's reports late last week, we noted to be careful with the exuberance especially off DRYS big sounding beat.  We feel the run-up may need to consolidate for a while, especially after the fade witnessed.

ILMN, CMP continue to show strength. FSL is coming back to be picked up again.

If the Footsie(FTSE) can use todays strength which evolved from the banking stocks prospects later in the week and carry it over 6000 by the time we get started tomorrow, we could see a nice follow through on top of the futures we see now.  Qatar also said it has $15 bln it wants to put into Euro/US banks over the next year.  Some financials would not be a bad idea to trade. GS, MER etc. 

..cards on the table..

Before the open tomorrow, we'll have many of the cards turned over to indicate where we're going.  The way today went , you'd think the downward bias will continue as the Economic data consisting of the CPI, Housing starts, Retail Redbook is unveiled and digested.   It seems to be too easy, too convenient to assume today's reversal will continue tomorrow as all the charts from the SPX to IWN have a narrowing >>>>> triangle formation looking more like a downward break coinciding with the big Eco' data day.     The trading programs must be ready to go.   In either direction.   To sell the break or will it program buy if a threat comes on the lower channel of the symmetrical triangle?.   Considering this market is so unpredictable, who knows what tomorrow will hold.   Today, we probably had a trap and tomorrow it might be reciprocated.   Who knows!.     As for today, the QQQ's already broke down just after 2pm in fast and furious fashion, only to be pushed back to the lower line of the triangle following HPQ's EPS after hours.   We're not putting too much on the prospects of HPQ rubbing off on the other techs and resuscitating them all by it's lonesome.   Today's gap was erased quickly, the commodities driven market today soon faltered as this only brought on more inflation fears.   With oil kissing $100 those $600 stimuli checks might not last too long. 

Yesterday, we led the Journal off with the Chemical/Agr'si because they were trading near 52 wk highs.  A few got up to those peaks and actually held the gap up opens.   Considering how fast the move was today and with the potential of misery in the market tomorrow, this is the first place we'd look to go short in if you haven't yet during today's reversal.    Yep, you can't pick sides for too long in this environment.  

The Coals also exploded with FDG leading the charge to a multi year high of $50 and change.   We've noted the past few journals of buying the dip, including after GS's downgrade on Friday.    These guys can do some consolidating now as well.  The idea of buying a dip is not in the cards in respect to a potential overall market hit tomorrow.

VLNC had a nice volume day and hit the 50% mark since being alerted to 8 trading days ago.  Too bad the truck wasn't loaded with it, tomorrow would not seem so important... GNK up over 10%, CLB should be watchlisted for a sunny day,  if you haven't done so yet after last weeks note on them. 

A clear head for tomorrow is the only option....we'll update if necessary before the open

You have our respect, Mr. Market...

It just feels too easy that we would be starting a strong rally from such an auspicious beginning late Friday.    Sure, news flow has been pretty positive as of late with respect to the bond insurers.    But, they are only positive with respect to themselves really at this point, the bond insurers.    What we have today is definitely a divergence of force going a separate way.    On one hand, every single strong and good play we've talked about on the site for the past few weeks were doing some fancy upside moves, corresponding to the index action.   On the other hand, everything else just didn't seem to catch this 189+ point drift.  Poor AAPL RIMM BIDU, where's the momo in all of these?. Only FSLR continues to provide some fast trading action.

What's good about the unchanged rating of these bond insurers is good for some of the parties involved, namely the financials.  But they had other things weighing on them early and only started to move late after selling off Fridays upward move.   The financials are not done writing down more stuff.    In the morning,  Goldman Sachs noted that all of the major brokerage are in for a writedown of between 1 to 12 billion dollars this quarter with Citi leading the charge.   We definitely have heard this song before roughly three months ago.    Only difference between then and now is that we are in a much more difficult economic situation this time around.

Leadership in this markets rally is still very narrow.    Basically we are only concentrating on a handful of stocks and they are the same names you are probably sick of hearing by now.   Truth is, we'd like to start play some other names without having to chase those names that have become extended today.   New closing highs were always something we used to add pieces to as part of our trading methodology near the close on index action like today.  Now the market is such that you need to take the profits before they evaporate.   Unfortunately, nothing else is really coming up on our scans to turnover into.

Tomorrow, we have some key economic number to be released and they are PPI and Consumer Confidence index.    A disappointing number from those two would definitely cast a shadow over the recent rally and it wouldn't be a surprise if the market gets smacked down hard.   We've pointed out the importance of the Eco data this week and so we all should've been thinking of taking profits off by close to avoid some breakfast spillage.    Technically, you can say this market has broken out of the wedge and we are up from here.     But seriously, we just can't imagine many more positive catalysts down the road once this ABK fever wears off.     We have lightened up most of our long positions today and will be eyeing the economic reports to determine if it's worth to get back in for another round.

Plays that are working....

Agri.-Chemical,   trust us, even we are sick of seeing them POT MOS etc. going up and making new high every other day. lol   The truth is, the higher they go, the smaller the risk/reward and more cautious we get.     Ever since the group's break out on Feb. 12th, the group has not been tested to the downside.    It means that we have not seen any kind of meaningful pullback to warrant much more upside.     Sure, these names can move off a 190+ Dow day, but we all know that those days are still far and few between.     We are trading them still but with a much reduced exposure at this point.

Coal-Steels-Metals-Oil, you can't seem to have an up day without these commodity plays.    The ones on our watchlist FLS CLB FDG MEE and CLF HES are two more we've recently added... all had a good day.  Even our rock salt-potash play, CMP keeps making highs.

Biotechs like ILMN ZMH off here showed some strength as well.   Remember, we try to concentrate on earnings and most making NCH's today from DJIM were selected off their last reports/guidance this Q. 

Bottom line, although this market is rallying off ABK news, you still can't underestimate the power of a near 200 point rally.    Traders could use this as an excuse to chase stuff that was working well, regardless the relevancy.    Tomorrow will be a real test with the economic reports and if this market takes the reports well,  it's likely that this rally will continue a bit longer.

Anyways, today played out to script from our morning intro to the day.  The 'concrete' news came and it turned into a real drama for the shorts.  The financials were the beneficiary, GS and MER moved back up 6 and 3 points respectively and we didn't get the momo stocks participating.  Hopefully you didn't jump in as there was no confirmation of them wanting to play just like on Friday.  Basically, it came down to holding the stocks followed here for the past few weeks to carry the load.   And yes, the futures lied again as they set a negative/flat tone before the open.  They started to pick it up nicely in the morning before the news came rocking down.      Tomorrow is a mystery. 

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.

...are we there yet, dad?

Honestly..the best lead we could give into tomorrows performance is to get a good nights sleep, brew a big chug of coffee by 830 am and just in case position a mickey of Jack D', Jose or whatever is your fave beverage in your desk drawer for later.     It's gonna be a helluva ride and most likely not just one way intraday and nothing less than triple digits.  We expect violent swings and actually would be disappointed if they do not come.   To predict what may happen would be insane, the possibilities are endless tonight.   The anticipation just got louder today as the Jobs report has collided with the SPX breaking to 1304.  Its amazing how often the ducks line up in the most opportune time.   Well today's flavor of day in TA' was this SPX close, tomorrow it might be 12000 and yesterday it was the wedgies.    It changes everyday as to what is important and is quite tiresome and gets confusing to the casual trader.   If we stick to the most simplistic, its the 12000 to 12800 range we've been keeping here to. 

Coming into the trading day, we said in part ..." Now the Bulls are left wondering what bailout will come for them without these rallies to save the downticks into the pit!."  What we were alluding to is that as more subprime fallout occurs and because the monoline fiasco gets pushed to the side now, where would a rally originate from to help the financials and therefore the market.   Little did we know they would drop so many bricks at once this premarket.   We had foreclosures, disclosures, delinquencies, failed margin calls, distressed selling at UBS, MER amending..blah blah.   They should've just gapped the market to closing levels instead of grinding.   But that's too easy, its the grinding the takes traders money away as itchy fingers make you jump in and then slowly rot you away with another leg down and then another and so on.   Anyways, the point was there is no saving the Gasparino way now.

Despite the day unfolding this way from the open, we had some nice moves from the mornings watch.  Unfortunately, this market continues to be made for ones with big bladders that can capitalize quick the gains in a CMP, BPZ, which got erased fast or the very patient nerves of steel ones who could have stuck with the CMP, FDG, JRCC calls here from its first days.    We also started to like the action in POT/MOS today once again.    So, not a wasted day and we'd stick to names highlighted this morning in case an opportunity to fade a move comes tomorrow or otherwise.  

Will we get there?.   Town of Capitulation?.   The truth is we'll probably not know till we've driven through it and then look back, we'd just settle for a gap down tomorrow and take it from there...or a surprise induced moon shot to just relieve the tension for now ....Good luck and we'll keep in touch during the day...

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   

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.

No biggie....day 2!

Despite all the negative earnings for a few cyclical companies , AA, AMD, the market showed little fear as it shrugged off an almost triple digit negative intraday move and then toyed with ending flat on the day.     Some corrective action is still needed, but some indices like the SPX just continue to be in a tightly held range.    Judging by the volume, both the Bull and Bear are acting like the news mongers they've become over the past months waiting for an excuse the run with the market either way.     Nobody wants to do anything it seems unless they get some hand holding in the way of bombastic news to guide them.    To us no news is good news and the only hand we're holding is that of our April hottie, our shadow/watchlist as it continues to lead us into greener pastures.   We could sit here all day, week and have what many are calling boring..ho'hum action while we all just profit here..it's all fine with us.     We've had plenty of nice moves in April and have pocketed many a gain, yet we are constantly coming back to our good friends.   Yesterday our friends even started to listen well after we alert noted a few may still shoot to highs into the close.  You really didn't need to do much all day and just catch the last half hour or even last 5 minutes with V, FDG, MELI.    These and a few others, mostly the shipping boys is where we're hanging out and to be honest are eager to get back in size on the steels etc.  The reason is our mouths are watering at the prospects of having this market rise.   Reason being is the financials are soooo' ready to lead us.   It's just a feelin', nothing really technical.    So, as all traders sit here, the Bears are waiting for recent history to repeat itself of the market sliding off these levels, hopefully hard on bad news, but we think they maybe are becoming complacent and will be in for some shock treatment.   

We're not going to go further today and jinx, you have the plays.  All we could say again is our mouths are watering, especially at the prospect of Bears foaming at the mouth shortly.  Uuuahh, we're getting nasty;)!.    Hey, if it doesn't happen, no biggie, we're happy with the damage we've done here recently and are not loaded to the hilt to take a hit if we don't get our way.  Hopefully, DJIMers' are feeling the same.  

GE who?

Short term memory.   Isn't that just the beauty of the markets and specifically earnings season!.   Just last Friday the global sky was flying and the noise of GE was vibrating into our eyes and ears for the next 72 hours, now INTC supposedly has solution for everything and anything and GE was just a bad dream.    Not to put a damper on things, but let's not get the bubbly out just yet!.    Sure...there are many a trader bludgeoned this year with an infatuation with tech and we welcome them back to bid up the market.   Hey, we can't eat coal and steel all day and every day so we'll help them out today, it's the least we could do with their beaten up techs.    But..today is only today as we don't really trust the lot and we need to really have them show us the money day in and day out this week.   Just like GE never happened, INTC maybe quickly forgotten if its brothers and sisters don't play fair the rest of the week.    Our strategy ain't changing overnight, we'll follow the herd and slice and dice the high beta's stocks  AAPL--RIMM--BIDU etc. for the moment, but we're not changing our diet that has been very, very good to us all.   You wanna see earnings!, wait till our stuff like the steels give guidance, it will put INTC's #'s to shame.    Anyways..on to yesterdays pre-INTC trading day....

Coals, this bunch seems unstoppable.  All we have to say is "look to MEE very soon as the chart looks to be setting up" and the damn thing explodes to over $50 even after gapping some. lol.  The good thing is these guys give you more than one opportunity a day as they slide down and give an another opportunity to enter in.  The same goes with PCX, if you didn't catch any of the previous days move it's all good cause you had a very nice chance to get some cheap yesterday.  FDG, WLT we like them all and whichever coal dips right is the one we are favoring at that time.

Solars,   with oil spiking to 113 it is no surprise to see these moving up.   Earnings are around the corner, SPWR corner is tomorrow and we are anticipating their numbers to dictate a lot of the action in days to come.  So we wait to dive deep, but it doesn't mean we're not dipping in our toes.  We did that with a fresh face yesterday in SOL for a few reasons.     We liked the supply contracts, we like the fact if the sector is heating up a 10million IPO name breaking out to a new high will get attention from traders.  It also has a pretty darn good IBD number and even if we haven't played this IBD $15 game for a long time, a solar that is eligible for IBD is hard to find!.    So, why not SOL to be in print!.    Too many continued to play the 15 dollar game at IBD for months now and it was a futile game.  What you need is not just a rating, you need the stock to be in a hot space!.    Maybe TITN was the last we recall and that was only because it was in the right place at the righ time (Ag').  We were quite aggressive buying it up yesterday.

A note EBAY is reporting tonight and so we were toying the idea around of MELI busting a move. 

..off to flip the pages of reports..the rush is starting with MBT, LUFK, CSX ...

Smell the roses...

Even before the market started trading today, we all knew that this was going to be a good day.   We just didn't know it could be that good!.  Not only did INTC provide us with some assurance that things aren't that "bad", we also got a couple of reports from JPM and WFC that were well received in the pre-market.     Economic data today was also inline and some big news from Potash all set the stage for a very positive open.    Bidding up some technology stocks was easy after Intel's earning, but never in our imagination that the rally today was so broad based.     There's literally hardly any stocks that finished negative on the day and many stocks finished 4%+ with some notable gainers from techs and agri/chem sector.  Our DJIM list lit up like a Christmas tree and it's only spring.

Oil gained again today and gold finished quite a bit higher.     U.S. dollar hit a new low and every commodity play got a bid today.   Yet, equity index held steady and finished near the high of the day as it grinded higher and higher.    Today's is one of the most steady up days we can recall in the last few months.    So what is wrong with this picture?    Nothing!     This is the exact theme we have been playing for months at DJIM.     As we pointed out for weeks, commodity market is basically in a bull market and any strength in equity market will bid up every commodity related plays as well when the time comes.

Here's the dilemma!    We think if it wasn't for the commodity market, which is becoming a bigger chunk of the equity market these days, our overall market might have been at a much lower level now.    Yes, we think that commodity market is the very reason the entire market did not crash lower the last few months.    It is strange but think about it.   Do we get up early every day the last few months knowing the credit crisis is bad and economy heading towards the recession and sulk?   No!    Because we've had plays such as POT, CMP, X, FDG, DRYS..... to look forward to.     Money has to flow somewhere to get some respectable return and it sure isn't going into treasury as you'd expect.

Here are some sector run downs...

Techs, with INTC's not so bad number and IBM's pretty good number out of the way, we'd expect this sector to heat up again.    No it doesn't mean that we'd challenge new highs soon but it just means that sentiment will be changed somewhat.    These days, an inline report will get you a nice price boost given that the "normal" expectation is for you to guide down.     We like beta plays such as RIMM, AAPL, BIDU because they really play into the psychology of "tech is still worth trading up".    Of course, GOOG's report Thursday is also significant and we feel that the combination of a low expectation from Google and the uncertainty of its report can potentially give traders another positive surprise.   Again, we don't play into the earnings, but if the report is half decent, we think GOOG can get back to $500 easy.

Coal, some of the names in the group will release earning soon and we'd continue to keep a close eye on this group.   We feel this group is getting the kind of action that's similar to the agri/chem group couple of months ago.    If this group has some positive things to say in their up coming reports, we'd be very aggressive in chasing some names up.     As far as trading wise, this group has been a champ last couple of weeks.

Agri/Chem, the biggest question right now on most people's mind has to be "is there an end to all this madness"?    Stock action wise, we are not sure at this point if the run-up will end any time soon.    News wise, we think this group will only get more and more good news down the road.   Basically, this group has the kind of pricing power any other industry would kill for.

Solars, maybe once FSLR hit $300, we'd finally get some rest. lol   We think the key in this group is not about their earning power, it's more to do with the oil price these days.    Basically, with the way crude moves, this group has nothing to lose.    We'd buy on any small dips at this point.   We like SOL the most at this point and we'd play very aggressive on dips with it.   SPWR earnings Thursday will be closely watched by solar junkies.

Shippers,  recently we alerted to these guys saying sooner than later they will ride the wave of coal and steels and that idea is paying off big time.    We also don't think the move is over as all the commodity stocks are hitting new highs left and right.    We've added back EXM to our shipper list today.

Steels, just buy the group! lol   Ok,  NUE is set to release report tomorrow and we'd see how others react to it.    This is actually the group which we have the lightest exposure now,  but we are waiting for opportunities to get back in.   Congrats to X hitting the $150+ mark, yep it was around $110-115 when we alerted first.  SCHN, MTL,STLD wow as well!

Oh yeah and MELI busted the move didn't it!.  Yesterday was our exit day pre Ebay report, it's been a good ride since being alerted and now we back up momentarily.

Bottom line, things are getting apparent that not every company is being affected by credit crisis and a slowing economy.     We should not treat every company as if it's the next GE or BSC and be rational about the whole situation.     In addition, we are still enjoying this ever lasting commodity bull market.

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!.

DJIM #22 2008

Over the weekend it seems many were saying the 4 day shortened trading week was much ado about nothing with not many stocks to chase.  That's true if you are judging this market by the DJIA.   Here, we are not as the concentration on commodity stocks continued with two big days sandwiching one not so.   That's fine as it presents the chance to recycle your favorites over and over again.   Also, quiet important was that the market was mending itself after the previous weeks fall.   We said be patient and let things settle down heading into last weeks trading and that is just what we got.    The healing process is most evident in the IWM as  it seems to have confirmed its breakout over 73 after a test.   We also had the NDX confirming the earlier breakout over 2000 by putting in a nice week.   It's clear from these broad indexes there is a big game going on between Oil vs. Tech.

Heading into this week the playground for DJIM remains the same.  The only differences to note week to week now is which commodity sector is best to trade at that particular time.  Example of this is just as we were once again becoming cautious on the Solars important subsidy news surfaced out of Germany premarket on Friday which made solars gap up at the open.  If this news comes too fruition, we will have all the time in the world to chase these stocks over the next Q as the news is quite significant.   One thing we wont do and didn't do is chase the gap open we saw on Friday, instead we are just moving up this sector up our trading ladder and we'll keep a closer eye on the stocks here.    We'll keep saying.." Out of all the commodity groups, coals are still showing the best technical with steels a distant second".    The amazing streak in the coals continued with DJIM's bushel of ANR, PCX and FDG making new highs on Friday.  MS has put ANR on overweight and FBR has put PCX as a top pick at their firm this morning while raising estimates on the whole sector.   We can only ask what took you boys so long?.  Always better to be early to a stock party isn't it or be stuck scratching your head if PCX is now too expensive at $108.   It was profiled here April 15th in the low 60's.

Really nothing has changed about what we'll most likely continue to trade, hell why would we!.   Until, we'll just pluck at a few new plays here and there as they emerge like on Friday with PVA, which even after a gap open managed to pull off about 4 pts after our alert.   We simply liked the idea off going back to the 'WELL' after our CLR play and just waited for the right time to alert.    If you want to get into the tech fever, we think the only stocks you need to trade are the RIMM, AAPL, BIDU, SOHU, GOOG.   If you want a few DJIA stocks, there is nothing wrong with concentrating on V, MA.    It's all there on the Shadowlist simplifying what we should be looking to trade depending on what area of the market is moving.   Have a good week!

**NOTE-  We added a direct link to the DJIM Shadowlist on the navigation column that you may enjoy.  Scrolling over names allows you access more info and you can change all charts to daily just above the first 3 charts.  We will update every week or two, until use new names from Alert, Journal to add until.