In Da Buff!

Well, at least that's how they call home next door in Buffalo.  In the markets it takes on a whole different twist these days!.   None of us should be surprised by today's market turnover.    You don't have to unwrap this market, you already know what's inside this box of tricks.   We highlighted the primary supports and resistance levels heading into the week, but before we get there we need to bypass a few secondary levels and today we got stomped at a few.   Most noticeable the 12400 on DJIA, we highlighted.  To get more technical you can see the QQQQ and SPY (S&P spdrs) did a u-turn and came up against the gap down highs from last week.   When you see things like this come to a screeching halt on charts and witness it all first hand in your watchlists, you can't help but wonder if we are to resume the downtrend.    Today's action was brutal, the quick move of 220+ up on Buffett was not Warren-ted and it proved so by end of day.    You see all the fixes including rate hikes, gov't lifelines and this news today don't do anything for the markets right here and now.   Buffett's 'guarantees' are for municipal bonds, they are not guarantees to turn this market up and get it roaring for more than a few hours or days before it bends over again..   All these maneuvers will graduallyl help the markets confidence over months, but what we need now is a flush and /or at least a test of lows.   No rally is satisfied knowing those lows need to be tested and we'll never get the rally we want if we don't go there first.    Market is just putting the inevitable on ice and so while on ice, we'll continue to get the melt downs we saw today.    This equals sloppy driving through the trading day.  On to the slop....

Ag's-Chemicals,  this group has had us teeter tottering for the past 3 days or so between trading it long or short.  The action following good earnings last week was quite meager following giving credence to this group possibly topping out.  Yesterdays action which we noted as surprising followed through early today.    What we didn't know is there was a Goldman Sachs Ag conference call for these players up today.  This explained the action yesterday and very early today.   Like a pre earnings run, we think we just had one to the conference and possibly nothing more.  As the conference winded down, we had these fall hard from NCH levels.   MOS and POT most notably.  This may have been a distribution day and so these may be topping out for the immediate future.   We will know better tomorrow following the AGU report.   If the report is very good and these don't react positively this will be a repeat of CF's upbeat disappointment the following day and we'll know its more likely a top here.  

Solars, as we reminded yesterday,  this group can't be trusted day to day now.   You might miss some nice days like Monday, but you may miss some pain like today as well.   FSLR, did a pre earnings day run, except it was a backwards one which saw it sliding $21 from high to low of day. It reports in the morning tomorrow and will probably beat handily.    It will be interesting to see the reaction..How good a  beat is cooked in?.   Be careful premkt if its not a beat of substance,  premkt lies a lot these days. 

The Coals jack-knifed today as if they had a momo group complex as well.  We'd look to pick up pieces on dips to get on this hot story in early '08.  It's definitely getting some attention now.

A few stocks off our recent pages managed to hold on to the green, so let's give them some print....

CMP, noted yesterday, looked finally discovered as a play with an Ag' angle as it rocketed from $47's open to 53 and managed to hold on to the gains on excellent volume.  Will need to digest these gains now, so if you missed it this morning its' probably best to wait on it and the sec' it put its head into today.  Another recent alert FLS touched $100 today and should not be left off any watchlist.  A few of the medical supply co's like BDX and new one we added some of today, ZMH , held on.  We'd throw in ILMN with this medical flavor even if its listed as a biotech.  On the cheap, VLNC painted a nice chart the last few days and has December highs in sight.

..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.

Triangle....

In case you have been visiting various T/A sites lately or have been paying attention to some of the CNBC commentators, you'd often hear the mention of "breaking out of triangle"!    What they are referring to is the exact same thing we have been talking for the last few days.  Basically, market participants, especially the ones heavily into T/A , are looking for a big move that would take us out of this trading range.  This infatuation has really been led by the Shorts to scare.   This trading range has basically been teasing us with some false moves left and right.     Today's no exception.    What started as a happy camper for bears kind of day only ended up as a "do I need to worry about my short position" at the end of the day.  The rush to cover positions would result in some fast and furious moves once these triangles get busted. 

This market has a particular way to mess with your minds lately.    What may seem like a logical outcome may actually turn out to be something else.   This is what we attempted to say in the Journal leading into today's action as everything pointed to a breakdown.   Today's CPI data was not good, and that's a fact.    The last thing we need at this moment is more inflation worry and that'll definitely hamper any recovery from a potential recession.    Also, the details of the last Fed. meeting was released today and we now have the actually acknowledgement of the Bernanke and company that growth rate will be slowed down this year.     So how are all these news not pushing this market down?    Don't ask why! .   It's just happening as we pointed out the possibility this weekend and that's all we need to know. "...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. "       

Today action was some reinforcement.

Today, the bears seemed to have all the right cards and there was no reason not to think that things won't go their merry way.     However, as we all have known before, market has its own mind when it comes to timing of a break down.     In our opinion, in light of the recent economic news and a seasonal slower trading environment coming up, the market will eventually come down and at least test the recent low.     When will it happen?    We now have a feeling that we may be due for a big upward move before it gets rolled over.      We also have a feeling that many participants who are bearish on this market are actually scared that we'd have a big short term rally.       Then there's this triangle talk.    As the trading range is tightening up, the urgency to have a move has become far greater.    We feel the big move is going to happen very soon and this time around, you may not want to fade this move right away as the move can probably carry a few days worth of momentum at least.

The most efficient trading strategy during the past few weeks is to fade the move.   It means you go the opposite of a strong move and it takes a day or two before you get paid off handsomely.    If we are anticipating a big move that's likely to carry more than a few day's worth of momentum, you may not want to fade it as soon as possible.    Rather, you may simply want to trade with the move.     Of course, we aren't specifically calling for a direction here but merely pointing out the probability is much better now.

If we do start to get a move up, the most obvious sign we are looking for is from the XLF, or the financial sector to join in.     Financials led us to a 1000 point move from 11700 to 12780 and we feel it'll once again be the key to a potential rally.    If we get some nasty deteriorating action from the financials, then you'd know which direction this market is heading.

Commodities, believe it or not, the reason why this market isn't going down as many would suggest is the fact commodity groups are pulling it up.   We have everything from oil, coal, steel, gold, metals, fertilizers, food...and just about everything related to them having a lot of strength last couple of days.    Forget about AAPL RIMM BIDU, we have to expand our trading circle and know better about the MTL CLF(eps tomorrow) and even the PBR FDG POT MOS etc., we've traded before.     If global inflation is as real as analysts suggest, we better replace more of the plays on our watchlist.    Can this be a commodity year?    For many commodities, we are already into the unchartered territory so it's definitely plausible at this moment.

Now some plays....

Agri/Chem.,   love them or hate them!    You have to love them this week because they just don't seem to want to stop, regardless of this market's direction.   We hate them because it hasn't presented us with any good buying opportunity last few days.    POT MOS CF all notched new closing highs today. 

Steels/Iron Ore,  apparently the deal over the weekend was that some Asian companies agreed to iron ore price hike.   This explains a lot of upward movement from this sector.    We are liking many old yet familiar names in this sector including MTL CLF X GGB etc.

Solars,  again, the kind of eps/outlook reported by FSLR does not necessarily get shared by other solar companies.    We again witnessed a mighty miss from STP and it's having a pretty dramatic effect on other plays in the sector.    We were picking up some FSLR earlier today around $205 alert time and are comfortable swinging/ holding some for next couple of days.

Recent EPS winners, we are keeping our eyes on some of the companies that had strong reaction to their recent earning report.   We were buying pieces and/or eyeing FLS CLB JLL MA AXE ILMN CMP... for some good action provided this market breaks out to the upside.  Take the time to review this earnings seasons Journals to see if something is missing from your watchlist.  It's been a tough go this season, but most names here have performed well since being introduced and should continue too after surviving all this.

Bottom line, we aren't leaning too heavily in either direction just yet, but based on the way this market shakes off bad news lately, the momentum seems to be shifting toward up and not down.   It could be this week, if no news bomb comes across.... Just be ready