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Entries in Haynesville Shale play (12)


DJIM #23  2008

Lets just say the past week ended in a pretty gruesome fashion.     When both the economic worry and surge of crude oil hit you in the heart, pocketbook there's really no chance this market can be bullish in anyway.     In any case, this market might have just over reacted a bit over the Friday's news.   As traders looked to a modest job losses number, the attention turned to he unemployment rate which jumped quite a bit.  There is two arguments to this as expected.   We think it's an aberration, reminiscent of the ISM plunge in February to 41+. The market overacted in regards to the employment situation, the big picture here is the job losses are holding up.    As far as oil price jumping over $10, that should not come as a surprise because we all pretty well agree it's going higher.   Simply, we think the market has underestimated the rising risks to crude oil demand.

Is this market in trouble?   If you look at the technical, we are really just a couple of days away from the March low, as far as DJIA is concerned.  However, both QQQQ and IWM are still far off the March low.   So in another words, the broad market isn't in as big of a trouble as the Dow suggests.    Of course, if you look at many plays on DJIM shadow list, it really wasn't until the last trading hour on Friday that some of the plays just gave up some gains due to the overall pressure and natural profit taking.     We think last Friday is more than likely a one time event.    Adjusting to high oil price isn't going to be done with one day and the volume isn't suggesting any sort of panic.    We have mentioned before that the likelihood of sustained high oil price is pretty high and the market will have to learn to deal with it.    In fact, there's an article in this weekend's Barron's that talked about the oil situation.    The same analyst who called the $150 oil price a few weeks ago from Goldman is seeing the peak price of oil between $150 to $200.    The one point he remained unclear though, is that how long the high oil price will stay with us.   

For DJIM, the focus on oil these days is very good for us.    The more media and analysts talk about the surge in oil price, it probably means more commodity plays will benefit as well.   Coals were upgraded again on Friday.   At this point, we have come to realization that some of our plays, including the coals may not give us a good pullback we had hoped for.    What we hope now instead is that some of our plays slow down so we can simply catch some on a pause.    We added a new play IPHS on Friday and we have noted that it held up extremely well despite the weakness of this market.    We are looking to add more in the coming week if it stays this strong.

Besides the Oil, spotlight will be on LEH this week to see how much they cut their leverage and what losses they'll report.  It won't be rosy, but if they throw out the kitchen sink finally, it 'may' help the financials in days to come.   In a low volume environment as we have now, we have the same ability to take a run to the upside just as quick.  Be prepared early in the week, if a turn comes it will likely be a pretty good one.  We definitely think volatile days not seen since early in the year are back for the short term.

The Haynesville Shale play is not going away.   PVA was only the first to release results and the market has responded very well.  Many more will and this will idea will remain in play as results will be catalysts.   So as solars, shippers etc, we think the shelf life on this play will continue and DJIM will be all around it.       HK, GDP, XCO, GMXR are the other operators in the area we like.


..wagging the tail?

Did the market wagging tails like a dog signal anything of significance at the close?.  Did it signal a nod of recognition to get traders back in the game?.   If a tail is truly a communication device , well then we were being told we should think about buying because of the tails forming on many a stock and index end of day.     Did we?..Well, no, not just yet as we know confirmation is needed in this market and we'd rather wait till the next morning because we never know what we may wake up to.     Wakey, wakey! looks like Bernanke wagged his tongue late in the night and has sent the dollar higher by hinting more than ever the cuts are done with.   Chances are any late day buyers holding overnight will see there gains flushed away in the morning.  Are Bernanke's comments enough to block any technical momentum formed late in the afternoon?.   The futures suggest such, but we know the futures are the biggest headfake around these days.    Be prepared for anything intraday now as big moves should rule with volatility back in the game.   Buying the fade for a flip may be the flavor making a comeback intraday.

As far as the trading day, besides the "Shales" being the new Solar ;),  it was looking quite pathetic.  Even the CRX was ready to eclipse the previous trading day lows, but then seemingly out of the blue stocks like RIMM started to move, even the commodity index we track closely reversed nicely...  Hmmm, one look at a few things like the NDX, SOX and you understood why.    A reversal was occurring as these hit the 50ema.   Yep, the same 50ema which we just saw balloon a move in the $CRX recently.   But, do we really care about the NDX?.    Yes, we do for the overall health of the market, but the concern here is Bernanke popped the commodity run for today as a higher dollar psychology will hurt our winning plays.    It may hurt more than usual if you haven't been taking profits along the way, but it also should be looked as a possible opp' in the near term.   Any exaggerated drop in our commodity plays is a strong possibility at these lofty heights.    Watch the $CRX early on.   A game of dominos potential is there, never think your hottie stock is immune.     Overall, we'd look at drops as an opportunity to pick up some favorites on the cheap sooner than later.    Dollar or no dollar noise,  strength in these commodity plays is not going away in 2008!.   It may get stalled here and there, but it ain't going away.  

As you are well aware of, we don't look for potential bottoms to squeeze out a play in individual stocks and we're not doing it here on any potential technical reversal signal given along the way.   We always want confirmation on stocks ..a change of pace and we definitely want to see one on the indices before buying back into this game.    The brutal action from Friday is fresh on traders minds, scars were left and they didn't heal overnight.  We are maintaining a very light exposure to stocks...commodities ...widgets. 


sell off continues, but...

...we can't really feel it.    The selling continued and main indexes are now down a fat -520/-115/-65 since Friday's highs. A bounce seems inevitable and/or at least getting very close.   Nothing has changed in the marketplace as the same Oil and Financial noise burdens it and nothing has changed in our strategy now.     It's pretty obvious what that is in our most recent Journals.   We have very little exposure ( a few selective holds in our favorite sectors) and it is better to wait than act and be caught in a ugly session such as yesterdays.    When we are trading, we are sticking to those favorite Ag-chems and Coal and our Haynesville Oil Shale stocks, the Shale names were highlighted in DJIM #23 and a few of those names bolded that are not in our Shadowlist as of last weekend should replace a Shippers, Solars names.  We're not playing hero with these dogs as they take it on the chin.    A dumbfounded, but still cute CNBC anchor yesterday to Haynesville idea was funny to see.   The analyst responded "you heard it here first from me" in regards to this play. yeah, okay guy!. 

One thing to point out today is last time ACI got downgraded it hit other coal names.  One point that is not covered by Briefingcom this morning is JPM is raising 2009 estimates for coal pricing to $300/metric tonne from 240 and all their estimates for covered coal companies rise under this new pricing, even ACI.    MEE is one under their umbrella.   All the downgrade for ACI means is it is more fairly valued than the other names they cover.   So, if their is any misinterpretation from the downgrade with coals getting hit, we'd use it as buy opp'.

It's pretty simple now, so not much to add going into the trading day, except maybe read over most recent Journals as to what we're thinking and what names we're into...


DJIM #24  2008

Another week of the market being held hostage by Oil and the Financials/ Brokerages has passed.  But, heading into this trading week we're possibly in a position to see a 'change of pace' this week as GS and others in their group report, while Oil is on the verge of doing something from a technical analysis position ( forming a pennant formation).   Hopefully, these dynamics can make the market move in either direction just to give some clarity.   The only positive to possibly takeaway from last week for the overall market was that Fridays move didn't fizzle out like every other move during the week.   We're not overly excited about the action, we were more excited by the continued strength of our heavily followed as at least 8 put in New highs.   Of course, this consists of Coals ( ANR PCX MEE JRCC ), Ag-Chem ( IPHS MOS) and those Oil Shale plays like GDP.   The theme heading into this trading week remains the same from last week..."When we are trading, we are sticking to those favorite Ag-chems and Coal and our Haynesville Oil Shale stocks,.."'

We've updated the Shadowlist and have included the GMXR XCO Shale plays noted before, while removing the Shippers and China stocks to a secondary list for now.

A few have asked why we follow the $CRX and not the CRB index.  The reason is the Morgan Stanley consists of individual stocks with some of our favorites being the 2 largest positions POT 6.7%, X 6.55%, while the CRB uses a 4- tiered approach to allocating among commodities included in the index.  Group 1 includes only petroleum products with Crude Oil having a 23% index weigh.   We simply find the $CRX a better measure as it's based on shares of widely held and therefore seems to give a better insight to intraday activity of where our stocks may go.

As long as our groups show leadership in an uncertain market, we won't stray...unless it's to bet on Tiger Woods today.



Big 15..

Today's the kind of day which you can just sit back and relax.   Ok, maybe it's just a little wishful thinking here as traders hardly ever relax.   The truth is, there is not a lot of news headline today and market behaved with very low volatility.    We like this!   Why?  We just can't help but noticing that whenever market is low on volatility, our playlist is almost always high on greens.  Just check out the "BIG 15" from yesterday making new highs off our Shadowlist.   Go to Shadowlist link and change signal box to new high.

With the turmoil in financial stocks and this being a supposedly "tough" trading year, how often do you get asked by friends/relatives that if you are doing well with your portfolio?    Instead of a straight answer, we simply tell them that we've been trading the commodity stocks, which is the same reply a month ago, two months ago, and three months ago and the lead into 2008.

As you can see, this game still rewards the mentality of "it's better late than never"!    However, if you are stubborn enough to refuse to accept this fact, then a lot is being missed out on the table.     Sure, playing some commodity now definitely does NOT give you the same kind of risk/reward ratio compared to a months or two ago.    It just doesn't mean it won't give you any reward.    In fact, we like to trade stuff with the greatest visibility.     If a stock has great earning report, it gives us good visibility that it may do so again in next quarter.   This view/strategy is shared by so many and that's the reason why we have had so much success with the earnings winners in the past.     For this year, the visibility isn't with earnings plays because a lot of uncertainty within our economy is bringing a very murky picture on what lies ahead.     What is clear though is that commodity prices are increasing and at a pace we've never dealt with before.    This is just the beauty of trading world.    If we can all foresee the high energy prices a year ago, we all should be billionaires by now.    Nope, it doesn't work that way.     We have to constantly evaluate the situation and be prepared for surprises and the "unthinkable"!

Many commodity plays on our shadowlist are slowly grinding higher.    Some of you may already got uncomfortable playing some prices knowing that you were playing these at a much lower level just few weeks ago.    We say, don't ever let that mentality get into your head because that'll hurt you from making good trading judgements down the road.     Basically, trading POT at $230 is no different than trading POT at $150, as long as you are aware what the trend is and you are trading WITH the trend.    Sure, you may not want to commit the same size when the stock moves higher and that's just fine.  Maybe PCX and ANR seemed expensive in the $50's just weeks ago after introduction here, hopefully this finally confirms quality is better than the quantity of shares in $5-10 stocks.    We haven't done any major updates to our shadowlist and it may be "boring" to look at the same plays every day if your not participating.   The point is, you have to absolutely stick with what's working currently. Anyways, the most recent plays we introduced are doing great.   The Shale Gas plays and IPHS come to mind.   Even as a lousy trader, you just can't lose over a period of time with the right kind of plays.  In some cases, a DJIM investor with a longer term perspective may be doing better than a DJIM trader so far in 2008.     The past couple of years, the reason why our plays changed so quickly is the fact many if not most of those plays are "small caps earning winners" based and we know how fast flavour was changing from one to another.     This year, we are going through an unprecedented run-up in commodity prices and we simply don't want to be anywhere else, focus and/ or money wise.

"Shale Plays" got a kick start this week as the news from GDP/CHK just spread across the zone.   Also, ECA has stuck their behemoth hand into Haynesville with a boatload of acreage.  The potential for the smaller caps names noted here, is of course the better trade as far as potential percentage gains than huge ECA.  There is only about 60mln float between GMXR, PVA, GDP.   We are in a few of these Shale plays and we'd intend to add on weakness.   

Agri. plays are still working and our little IPHS has gone from $28 alert to notch another nch and the action has simply been spectacular.    There's a possibility that the IPHS is in imminent need of a pullback and we'd get on the bids aggressively when it comes.    

Coals, what more can be said?    NCH's all over the joint.

A couple of beaten down groups (Ships and Solars) also made a little advance today and we are looking at some solar plays for potential intraday action tomorrow.    ENER, a name we switched to in mid- May as far as Solars were concerned, is basically trading in the world of its own and it's on pace to become the baby FSLR.   We highlighted this a while ago as one of our favourite Solar plays and it's apparent that this one is emerging to be the "real deal"!   We are hoping to catch it again on a break , well any break really.

Bottom line, GS is reporting tomorrow and lets hope it's another none event.   Seriously, enough damage has been done in the financial sector and lets cross our fingers for some good news from this sector.  


..what the world needs now.... some SHALE and POT!!.   Okay and some COAL, if you wanna get down and dirty.   This market can be just as depressing as the Barclays commercial played on CNBC,  if you're not in the right places.   Visit site to see.   A meandering, yet slowly spiraling market with sights on testing early year lows can make for a downer unless sooner or later you begin to participate, hopefully all DJIM members have gotten it or else why would you still be here.   We're glad to see posts like yesterdays in the forum and the emails we receive to let us know we're not doing this all for not.   As far as this market,  it is to the point where we are oblivious to the major indices as it has almost nothing to do with where we are.  Yesterday, the market should have been just happy enough to go green after GS didn't toss out a bombshell,  it was almost a non-event which should have done something positive for the market.    Maybe after the LEH re-org, GS, more reports is what is needed.   GS didn't seem to be enough.   Instead of a happy market,  we got barely over Mondays highs (SPX) before a steady slide that went a little to deep.   Maybe expiration week can provide a move before, either way..honestly!.  Just give some clarity to all those trading, investing elsewhere.   Elsewhere as in places other than the commodities!.  Excluding the ETF's in our shadowlist used for guidance, we were at 21 stocks making new highs which is about 50% of the stocks listed.   Doubt this can go much higher, so maybe we soon we get a pullback to saddle back up.   As of now, we just go back and forth between names as traders depending on which look best at the time.    Those not trading full-time should be doing just fine holding overnight recently their favorites in each sector say.   Anyways, don't have much to add as we've given all the clarity we could recently.  As said in forum yesterday, you don't need to be heavily invested, just selective  always remembering to  pocket profits.  Opportunities will not go away as we go forward.  Money needs to flow somewhere. 




..Doom and Gloom, yet Bloom

Same headlines, same story, same action, same end results!   Lots of doom and gloom for the market, yet our commodities plays bloom.   Morgan Stanley's earning pooped the financial market,  FDX cited US sluggish demand ahead,  RBS issued a global stock & credit crash with SPX falling to 1050 by September, all weighted on the market dipping the DJIA momentarily below 12000.    On the other hand, commodity sectors finished another cheery day and many of our plays notched a new closing high.    You either love it or hate it, these days!      For those that have viewed commodity market as nothing but a hedge have been missing out on the fun.    We have been often approached by friends and relatives who claim the "hedge" in their portfolio has been working well and thank god for them they are having a not so bad year.    The "hedge" they refer to is the kind of stuff that makes up DJIM's shadowlist.     To us, why hedge?   The commodity sectors, which may not be the traditional core holding of a portfolio, is going through a run-up of a lifetime and you simply wanted to just use it as a hedge, we ask?  Why?   Maybe, this is what separates a professional trader from an "educated" investor.    Instead of investing "into" the future, we traders simply try to take advantage of the current demand and supply imbalance.

Oh yes, our DJIM leaders had another great day with 22 hitting new highs, some closes were unbelievable PCX ANR.

A few firm notes of note Wednesday....talking about coming late to a party..but, maybe not as we said the other day, "It's better late than never".

Coals,  Stifel raised estimates for coal expectations of US coal miners, MEE raised to $123 from 73 was included.

Shales, XCO, raised to $40 by Keybanc is one of the top 3 Shale plays in our book due to acreage in area.  It is also probably the safest longer term hold if you want one.   This is due to its bigger size of outstanding shares which provides less volatility than the GDP, GMXR, HX may. PVA GDP, GMXR all raised by Jefferies to low $80's, HK to $49.  We already alerted BMO price ratings on Tuesday, we only signal up's/downgrades we think may be significant to days action as we've noted before.   As you can see by the above, Shale noise is just starting as commercial development is inevitable based on results so far.

Steels, the earnings report outlook from CMC, we think bodes well for US steel producers ( X )to produce record EPS going forward.

Again, watch $CRX as indicator here intraday direction.  Also, if selling starts at any point this week watch for 955 to hold to avoid any further down action. 



..dirty 4 letter word..

You gotta like it when CNBC is highlighting DJIM stuff months later as "coal is cool" this morning.   As for yesterday's action, it was really no surprise that coal had a pullback.   It was inevitable after this recent kick up.   The dirty 4 letter word CNBC is using this morning is coal and it ain't going away as long as crude is on the mind this year.    Didn't we just say if you really want to get down and dirty have some coal?.   Actually, it was around these parts months earlier as you know.   Considering, we profiled coal as possibly the next big trading thing in early February, we welcome any pullback after seeing many introduced here double and triple since.   We've been selective in choosing a few, JRCC has gone from $14 to 50's, FDG, MEE have run nicely and we discovered PCX and ANR in the $50's.    Again, don't fret the action Thursday, just get ready to saddle back up one day soon, but don't do it guessing a bottom unless you are a full-time trader and can move around intraday.   We noted yesterday at 10am with $CRX at 976 a stall may occur for profit taking.   Well, it did as the $CRX fell to 961 by close.   Watch 955 as an level of interest noted yesterday to either bounce or exit.   Remember, we can't say sell or buy for that matter for obvious reasons..we can only lead and say what is on mind.    If you're trading these day by day, you may have used the alert to exit a few names in the commodity area and go clean into the weekend.   But,  if you've been holding a few for weeks it's no really big deal as you've generated nice gains.  

Anyways, a lot of noise this morning in the markets and it's time to start the weekend.   We noted a few stocks we're in yesterday. ENER and SCHN because steels held ground yesterday

We will do an in depth write up on the Haynesville Shale play we introduced recently this weekend.   There are more than a few plays and you'll have to decipher which fills your needs best as there ones to trade and some you may want to just tuck under your pillow.   As with coal this play ain't going away and in months they'll be saying Shale is dirty 5 letter word.    

Have a good weekend.... Anybody watching and enjoying Euro Cup soccer?'s so much better than watching the market take its kicks!


DJIM #25, 2008

Summer has just officially begun in North America and things are seemingly heating up for the next few months.    For some reason, we have this feeling that this is not going to be a relaxing summer for many traders.    Of course, there's always two sides to every coin and it all depends on your trading strategy, you can be either be stressed or relieved as we go forward.     Market as a whole, is not doing too good lately as we all can see.   Oil and Financials continue to rule the market on a daily basis.   Nasdaq is in danger of breaching it's recent lows while Dow is headed for primary support at 11750.    SPX, is also much closer to its year low than the year high with it's primary support at about 1270.    We are literally at a point where many market participants have to ask themselves, "what are we really fighting for?"

Much of the market turmoil is being blamed on the financial sector and its credit squeeze and this is perhaps the most troubling side of this market.    If our capital market fails, nothing else really matters.    Well, what's happening out there is not the case that the system is failing, it's just the fact people do no have any faith in the recovery of the financial sectors.    Right now, no one can  intelligently give a reasonable time frame of how much longer the financial sector will suffer.   P/E and valuation is currently useless when the confidence level is so low towards these financial companies.    In hindsight,  some of these financial will probably make a great investment in the long term.    However, at the present time, you'd be thrown out of your office if your investors find out you are still holding/buying these troubling stocks as a money manager.     To DJIM, the process of gaining faith and confidence in the financial market takes time and unfortunately we do no have the insight knowledge nor time and capital to wait it out.   So, we pretty much leave everything and anything that have to do with the financial market alone.

For some of us who have started trading in the 90s, we really haven't dealt with an inflationary induced stock market.    Also, the world isn't the same now compared to the 70s or 80s.     You can draw parallels only to a certain extent between different periods and the rest is new and unfamiliar to us.     The energy crisis now is definitely different from the energy crisis in the 70s.    The inflation worry now is also different from the inflationary period in the late 80s.    The major difference, in our opinion, is that the crisis we are going through now is more of a world problem, as opposed to the problem for the western countries.     China and India and many other developing countries didn't  matter in the world economy 20 or 30 years ago.    Nowadays, they are probably the very reason we are entering a high energy price era.      Demand and supply of crude or any other commodity is no longer just a North American or G7 issue.     The point is, commodity issue is a global issue and it takes a long time to balance things out.

For DJIM, we got crude and inflation plays covered and we leave financial stuff alone, what else do we have to worry about at the moment?   Nothing really!    We fight the good fight and we leave the risky stuff to others.  That's the difference between being stressed out as we come back to March lows or being relieved by playing the commodity stocks.  In a few weeks, another round of earning reports will start and we'll have a much better picture this time to gauge how much oil and other commodities are affecting our economy.   In the coming week, our focus will continue to be on our fave groups, including the Shale plays ( in depth look in tomorrows Journal) and other ones with good technicals, such as those making new highs eg. X, ENER.   MON will report on Wednesday and this one will be interesting to watch and we have a feeling it'll crush the number and investors will give it another rosy reaction.    Also, some M & A activity starts the week off for this group.


De-risking of Haynesville Shale play

In late March, Chesapeake CHK said that it believes the Haynesville Shale Play could potentially have a larger impact on the company than any other play in which it has participated to date.  It added the plays economics would rival the Barnett Shale play as the wells in play are capable of producing 5+ Bcfe for $5-6MM putting the acreage at a potential worth of $40,000/acre.  The comparisons to Barnett are/were no small feat and very bullish,  CHK had it's flag planted and interest spread to those who have well flags up in the Haynesville area.

As for traders here,  we said to watch for further catalysts off results of those companies with flags in area.   The results are pouring in and they have moved these stocks fast.   What you should be watching for is the above results 5+ Bcf which would suggest $40k/acre when viewing news releases of these stocks.   These are not vertical results that you may see in results of some releases such as GDP yesterday.  The more companies producing these results simply DE-RISKS the Haynesville Shale play (HSP) into a 'Commercial viable development'!.   The more positive exploration results the more de-risking of acreage in area occurs.   The acreage between Elm Grove and East Carthage is potentially worth 10-50k/acre and until a few weeks ago the stocks in this area had virtually none of this value in them, but since we alerted PVA May 30th in the $59 off exploration results,  we've seen this value go into many of the stocks GDP, XCO, GMXR, CRK, HK that have wells within 15 miles of CHK producing wells and even further away.  We noted all these stocks all around DJIM, including Forum June 2nd.   GMXR, PVA have data points further west away from CHK`s current activity and this suggests that the play is continuous to an area of 30 miles!.  Even HK`s wells suggest the play runs 30 miles east and 15-20 miles south, but the play may be limited to the north as results 25 miles were not so great.  So that pretty well draws you a map and if you see other stocks being pumped as a HSP, you`d better know where their flags are.  

Here are the stocks with best exposure numbers to CHK wells , others like EOG have 0 exposure within 15miles, while 150k outside and others with good exposure like DVN are not fit for our trading crtieria.

                                      Net acreage within 15miles -6 county acreage=  Total

GDP                                18,700- 47,000= 65,700= 281$MM value

XCO                                34,000- 120,000= 154,000=580$MM value

GMXR                              8,000-  13,000= 21,000=132,000$MM value

CRK                                15,000- 80,000= 95,000= 310,000$MM value

PVA                                 12,000-39,000= 51,000= 276,000$MM value

HK                                   40,000- 25,000= 65,000= 500,000$MM value


CHK                                  75,000-125,000=200,000= 1,250$MM value

These assumptions are for $10k acre (price which acreage is being bought by CHK in area)value near CHK and at 2-4k for other acreage further away.  To get a further value such as value share you need to know the share count.  This is where we all need to look as far as trading is concerned.  GMXR has a share count of around 15m while an XCO has over 100m and CHK over 480m.  Simply this is where volatility and quickest price appreciation potential comes from.   We prefer to trade the 26m of GDP than the 480m of CHK.  XCO fits nicely in between if you want to put one away under a pillow based on share count and exposure to HSP.

Basically, this is to let you know what you are looking for as these stocks will move on catalysts such as acreage acquisition, you need to know how much is significant and where it is to CHK best flags.  You can now do this by comparing to the above stats.   Just like when we alerted GMXR June 17th had bought more acreage to add to the above acreage, more will come as yesterday did with GDP and the ensuing run.  GDP got a small amount of acreage, but a surprisingly great price of $1,147K-acre.   This is only because they are covering the capital on the 1st well from a private company they are partnering with here.   It does not de-value the HSP acreage paid by CHK and others.   You also know what is a good result and what will be a bad one to make a trading decision.   This is all about de-risking this HSP play.   If some result within 15 miles of CHK doesnt meet the +5 BCFE now expected, which is the ideal number,  than you know the whole HSP players will suffer. 

As we always say, it is best to be ahead of the herd and dump unto them when they come.  This is from a trading perspective and it has been happening since we took on this play at the end of June.   This will continue and the potential is great as there are not a lot of shares available in the float of a GMXR, GDP etc. for the institutions that will want to be in HSP.    We noted recently when a money manager came on CNBC and said well you heard it here first in regards to HSP, since Jefferies'  Hogan has pumped our plays and Erin Burnett is counting the times HSP comes up.   Simply, despite this tremendous run in just over 3 weeks this has potential to be on many more radars as time goes on as this play gets de-risked for commercial development.

As far the rest of the market,   it was a disappointment again as no buying came in after Fridays dump.   Not a good sign as the market continues to show vulnerability.   Today will be no different as UPS gave the market another kick with the magnitude of their 2Q downside.  But again, all this is happening in our neighbours backyard, our DJIM yard had at least 13 stocks from our shadowlist making new highs with many of our most recent alerts such as X SCHN ENER having incredible days.  We also had very positive news late for US carbon steels producers CLF, X as Rio Tinto announced it had achieved a 96.5% increase just for iron ore lumps.   Expect more EPS/price increases in days ahead for these, we already told you of one not publically released for X the other day.



Market train wreck.... still fine with us

Oil Oil Oil!...FED decision....falling dollar....underwhelming Tech forecasts....GS hitting their amigos' when they're down.....all helped lead to a 3% train wreck across the major indices..    No doubt about it, you could smell the doom and gloom before the opening bell!   For many people, the only thing they could do is pray that their holdings don't get hit.   Wishful thinking!    Basically, when mkt is set to open negatively on a very bad tone, you have to be prepared for a potentially nasty day and go defensive.      By going defensive, we don't mean by shorting or buying gold or T-bills.    When we go defensive, we trim any excess position or number positions to a comfortable size.     This is all still assuming that we are holding the best of the best plays before the opening bell.    As the day progresses and the day winds down, it will always become apparent which one of the holdings you trimmed earlier are bucking the market trend and you may add it back later on.     You may ask "what heck is the point of this exercise if you going to end up with a similar position toward the end of day?"     For us, this is just our way of dealing risk.  You never know when and if panic finally sets in and takes everything down.   Everyone has his/her own way of dealing the "monster down day" and this is how we deal with it.

To say this market is in trouble is just blatant ignorance.    Market has been in trouble for a long while and if it wasn't for the fact we have been sticking to the commodity plays, we wouldn't have enjoyed it either.      A series of disappointing reports and downgrades and breakout of crude just pushed this market right over the edge.    Yes, forget about that March low and you are now staring at a new low.     Even as a bystander, we can feel the pain across the board.  The casual newspaper reader must be thinking the world is falling apart, the headlines are scary.

With DJIM plays, story is different but it's eerily familiar.    Deja vu?    Most of the Shale plays actually finished in the green, a few steel plays showed resilience given the market condition.    Coal plays also closed near the high and we are encouraged that this group is showing good strength.    Perhaps, a turn is in place for the Coal group after the recent minor pullback.   The volume was low in these groups, no real sign of selling.   The game plan is exactly the same for DJIM and will continue to buy our favourite commodity plays on dips and ignore pretty much everything else.   

The question remains now is that "how much more bleeding will this market take before a bounce occurs?"    We can potentially bounce tomorrow but again, we are not interested in any beta stocks at this point.     We are also coming to the month end and there's potentially the "window dressing" action that can take place.    Just keep in mind, any "window dressing" will not come to the beaten down sector.  It realistically should come to where we've been.  

  • The market, majority of sectors have no positive catalysts, the Shales (exploration & production), the Steels, the Coals....DO!.  It's simple you do want to be where bearishness is contagious or do you want to be where bullishness is contagious?  

Stabilizing or just holiday blip?

For the past 2 trading we've seen what usually signals a market trying to stabilize, indices sliding from green to red, red to green and so forth intraday, one major index green the other red at the close.   Yesterday, we noted before the ISM that the market felt like it wanted to do something in a big way, especially if the ISM came in beyond the mean estimate, either way.  It did showing a number over 50 which shows expansion.  The gap down was soon fixed.   This 'feeling' was in part because the FTSE stumbled bad overnight, we had a very negative futures pre-market, yet our shadowlist high beta stocks were acting 'fishy' well (AAPL, RIMM).    Sometimes when things don't make sense, they do in the markets.  To us it was a clue to what may occur later in the day.  Preparation is always a key in trading even if what you're looking for doesn't come to fruition. When it does, it shows you were on your toes and not bleeping yourself for a missed opportunity to make dough.    Unfortunately this fishy action and move faded bad and this soon smelled of  holiday blip of volatility as the market sank lower than the gap down as the FTSE approached its last hour of trading.  Doubt this was a coincidence as we mirrored the day drop overseas.   A positive came in the afternoon as a potential reversal started with end of day volume that  may signal a bottom, SPX shows what maybe a triple bottom.   For the market to stabilize capitulation is needed, but it does not have to come just yet.   The market can rally up for sometime before coming down again, in the meantime the market can reverse.  End of day preparation payed, high beta's AAPL, RIMM closed up 6-7 pts and the Financial UYG put in a big volume reversal day.  FLR, a E&C company had a 7 point move intraday feeding off the ISM number as we alerted. 

As far as we're all concerned about the action, well... okay, we're really not concerned because we're all " Shaleheads ", right?.    Simply, more data is to be released this week, including employment numbers which could fuel markets into next week or kill it.    We want to see this mkt up 2%-3% in either a big 1 day or on consecutive days to signal any possible trend change, until we should just focus with what's been working and let the big money others work it all out. 

Shales,   we had some very positive joint venture news from CHK AH's.   This partnership just confirms more and more the potential commercial development in HSP.  We're not concerned about what it may do to the Shales today, we're just more thrilled about the long term prospects for our plays.   As speculators get whiff off this play with momentum money, we may get more volatility in days and weeks to come.  This could always involve some selling, profit taking on any of the plays showing all mighty gap exuberance as we saw last night.  On the other hand momentum is a wicked thing, so who knows how far these can go in the short term.   Yes, more than ever after CHK venture, we think it will be a race amongst the plays for triple digits $100+ as we said the other day.

Steels,   if there was a disappointment it was the SCHN EPS follow through reaction we warned of.   The results were excellent, but initially we thought they may be cooked in for the entire group as seen soon after by the action in SCHN, X, CLF.   Just as since MON's EPS result, this group may have signalled a pause, but the Ag-Chem group is dealing with the recent USDA report as well so it may not follow their flight.   One thing we were impressed about is the rebound of the $CRX of 17pts late in the day.  We need to cut through a 6 day trading wall at 969 here to know there is potentially more breakouts in store for many of the plays/ groups and for others to just get going again such as the Shippers here in the short term.