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

DJIM #14 2008

As the jobless rate spiked down to 2003 levels, it is almost impossible to argue a recession is in place, but it is also impossible to say that the Bear haven't lost it's grip on the markets as we saw the Bulls pulling the indices up and shrugging off the jobless number.   As we discussed all last week, the ability of the market to hold onto its gain after the 3%+ rally was signalling the selling had cooled down and this time it would be different than what followed the March rallies of the same proportions.   If this is indecision on the sellers than its good sign as they are not sure of things as before, the only argument they may use now is calling the low volume suspicious and that they are just waiting to rattle the rally.   Either way, it's not your problem or ours as our goal is to capitalize when the chance arises and last week we think did just here as DJIM's players, our index you may say outperformed anything in sight.  We had some nice alert leads ahead of the curve on CMP, DRYS, MELI and it's nice to see them getting some headlines right after.     When you're ahead of the curve, you get a chance to sell to the herd!.  That's the game!.  CMP was noted on CNBC as a stealth play behind POT, MOS, we profiled it in December, and it spiked in premkt and was a feature story on IBD this weekend. DRYS was referenced on the front page of Barrons this weekend to a good story inside.    Heading into the week, it's quite simple as there is no reason to change what's working and that's everything off our primary watchlist relating to...." Agri/chem, Steels, high beta Technology to Shippers, Solars and even oil stuff".   What will most likely come to hand this week is an important technical picture to track.  This is where volume comes into play that wasn't there last week, if it comes to the upside it will drive the market through resistance 12800.  If we see the 12800 coming with dry volume, we will most likely take positions down and wait for a clearer picture to emerge.   Right now, the Transports are leading the way and that is a very important positive signal for what possibly lies ahead for the rest of the indices, including the general economy.   Little economic data flow this week should allow an opportunity to potentially trigger some of the resistances and that is what we'd closely track this week. 

We've tweaked the DJIM primary tradelist, shadow list.  We've taken down a few financials as we don't need to monitor, trade 4-5 now and a few others that are just boring now like SAM, HURC.    Still the latter are EPS wins and if we get that trade again as we're starting to see, we'd keep them close to our primary list.  We've added the GU, JST as more on the speculative side, reason speculative you may say is because we'd rather lay our bigger dollars on the expensive stuff that's been working as that is where the volume allowing for easy exit is and where the sideline money from institutions is flowing to.   In the good ole'days when EPS and sector plays from midcaps rolled these would be on top of our list probably.   Times have changed and we need to see the momo game come back to go heavy at this point in these types.   Remember, if the mkt reverses in anything that resembles the past, these lower volume, cheaper plays will slide harder and have bigger spreads going down as buyers will dry up.    Simply, don't become complacent now just because the market is good and you think you're indestructible.   Others are included following mentions in alerts, Journal the past two weeks....MELI, RIG, CSX, SCHN.    WLT is another name we're adding.

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.

...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 primary shadowlist

Our platform list at close Friday,

Symbol  News  Last Price  Chg (Prev Close)  %Chg (Prev Close)  Volume   Low  
     
AAPL          181.08      +1.08             +0.60              35,931,400   178.55  
AKS           65.72       +2.79             +4.43              2,719,400    62.73   
AXYS          56.20       +0.96             +1.75              203,200      55.49   
BDX           88.27       -0.97             -1.09              977,300      87.94   
BIDU          362.00      -8.00             -2.16              4,117,500    357.60  
BZP           21.65       +1.89             +9.56              1,300,700    19.78   
CF            135.12      +3.08             +2.33              1,860,300    131.18  
CLF           159.96      +5.15             +3.33              2,142,700    153.85    
CMP           66.40       +2.80             +4.40              738,100      63.86   
CTRP          67.87       +2.82             +4.34              1,426,000    66.03   
DRYS          90.75       +7.54             +9.06              5,310,500    84.50   
EDU           75.73       -0.31             -0.41              318,900      75.13   
EOG           127.22      +0.37             +0.29              2,975,400    123.92  
EXM           43.23       +3.17             +7.91              1,450,900    40.50   
FDG           63.50       +2.73             +4.49              1,318,600    60.78   
FLS           123.57      +1.49             +1.22              677,000      121.77  
FSLR          277.50      +14.15            +5.37              4,754,900    266.70  
**FXI           164.00      +1.84             +1.13              4,882,600    162.45  
GS            200.27      +1.22             +0.61              9,437,500    198.00  
HES           106.34      +3.88             +3.79              3,905,800    103.51  
IPI           44.75       -0.33             -0.73              2,972,900    43.68   
**IWM           72.69       -0.06             -0.08              58,836,700   72.24   
JRCC          24.16       +2.48             +11.44             1,095,200    21.67   
JST           38.91       +1.09             +2.88              83,200       38.00   
**KOL           45.23       +2.11             +4.89              197,500      43.01      
LNN           100.65      -3.09             -2.98              468,700      99.81   
LUFK          74.99       +0.65             +0.87              144,600      74.81   
MA            285.50      -8.44             -2.87              4,470,400    281.85  
MEE           52.81       +1.77             +3.47              1,769,300    51.32   
MELI          50.25       0.00              +0.00              554,100      49.80   
MER           52.72       +0.33             +0.63              20,350,600   52.08   
MON           114.51      +0.85             +0.75              7,392,500    111.72  
MOS           124.90      +2.35             +1.92              6,247,600    120.15     
MTL           145.36      +7.51             +5.45              1,172,300    137.44  
NS            53.45       +0.43             +0.81              138,300      53.16   
PCLN          126.37      -1.86             -1.45              1,621,600    122.87  
PCX           68.02       +2.76             +4.23              275,100      64.49   
POT           186.94      +3.78             +2.06              12,151,800   184.64  
RIG           151.71      +5.95             +4.08              5,817,400    146.50  
RIMM          132.52      +4.52             +3.53              18,962,400   129.48  
SCHN          87.79       +1.39             +1.61              508,100      86.13   
SOHU          77.89       +2.45             +3.25              3,110,300    75.00   
SOL           16.00       +0.38             +2.43              981,100      15.85   
**SPY           141.65      +0.53             +0.38              181,585,500  140.56  
TBSI          44.25       +1.58             +3.70              697,900      42.29   
V             82.95       -2.45             -2.87              34,162,100   81.00   
WLT           72.95       +5.24             +7.74              4,146,500    66.13   
X             157.06      +5.40             +3.56              4,373,600    151.24  

** denotes ETF

A Sarcastic Pullback...

Maybe the market is disappointed that Microsoft was not able to pull through a deal with Yahoo, index traded down most of the day and ended near the low of the day.    So, market had a pullback, right?    Well, only if you aren't trading the DJIM stuff!    To all of us playing the DJIM market, today might as well be a triple digit gainer day.     From the beginning of the day, we were actually hoping and looking forward to some dip buying opportunity when we saw the softness of the index action.    However, it doesn't take long for us to realized that we better chase some action or else we'd be sorry for our inaction.  Are you following the $CRX we noted, support of 907 was regained late last week and today it gap opened 930!.  To put it simply, today's a superb day for majority of plays on DJIM watchlist.    We were very busy buying high and selling even higher.  Yesterday, we said the commods' will still offer the best bang for the buck on any given day....did it ever this day!   It is really hard to imagine what some of our plays would do had this market been in positive territory.

Still, we are glad that this market has this much needed "pullback" occurring!.    To be honest, this market does have a little over heated feel going into the week.    One day worth of pullback isn't probably going to alleviate this overbought feel but it's a start.   It relieves much needed pressure for this market to pullback.     Our original plan was to use any market weakness to get in on some of our favourite plays but this isn't the case today.    Basically we know how this goes, when a sector is hot, there's nothing to stop it from going up.

MVL, we also added this play and consider it a story stock due to the Iron Man flick that made 100mln over the weekend.  Its first self produced film release.  This opening guarantees a sequel to go along with Thor, Captain America, Avengers flicks in the next few years. We've traded this years ago on the same sort of hype and recall it being a nice story mover.   It also reported EPS and all is swell, so it fits here.  Anyways, it doesn't hurt to look beyond the obvious plays and play something outside the box once in awhile.

Today's strength comes from pretty much all of the plays on DJIM watchlist.   Ok, there's really no need to point out the gainers one by one because one just needs to only look at the watchlist.     Coal group had a boost from of course the CRX, but also the multiple price tgts increases for WLT and a EPS report from the alerted ANR (yesterday alert) that popped in the afternoon nicely to almost $58.  This is the group we liked the most from commodity sector from late last week if you remember.    Oil stocks also had a big day because we had another strong showing from the spot market.    Basically, it pays to buy oil stocks on weakness.

Today's the day which proves what happens when you trade the "right" kind of group.    Tuesday we have the CSCO report to watch for but we think Cisco hasn't been a factor in a long time.    But as we see with MSFT/YHOO, the market will use any excuse to either sell or buy up a day.   In any case, we are sticking to "buy weakness on a slow performing day and chase strength on strong performing day" with respect to our plays.