..Prove yourself!

Despite the aggressive late day broad market buying, we remain motionless and can only 'wait and see' for this market to prove itself.  As far as we're concerned this is just a short covering bounce from those lingering oversold conditions and not a reversal of any significance until we see some follow through.  If this move falters today there will be quite a few disappointed players who got back in the game yesterday.  This would come in the way of selling end of day as the bottom feeders flee for another try later on.   Our strategy here is to let the market come to us and not come to it at a potential bottom.

A few things of our widely followed to possibly trade or not today...

Ag's-Chems,  this pack led by POT, MOS was the best looking group out of the all the commodities.  If the early commodity massacre yesterday was the short term bottom, it is highly possible this group will lead.

Steels,  this bunch looked frail late in the day and only CLF price hike news after the close can give it some shine.  Despite the exuberance this may show early, we feel all this news has already been priced into the stock and sector.  Simply, this type of news is why the steel stocks ran to their lofty heights recently, it's nothing new or unexpected.   Best early and fast trade might be on those in its group, but for a trade and that's it for now.  

Shales,  quite frankly the offering by CHK is very disappointing.  This giant has done everything to make analysts, investors believe this wouldn't happen.  Most recently they sold a big stake to PXP in the HSP for 1.65bln, plus another 1.65bln to fund drilling and completion costs.  So yeah a 25mln share offering is a surprise here and we'd wait to see how this group handles the news. 

We'll monitor the market closer today and if we get the itch to buy, we'll alert.   Until, we just look at the big oil drop the past 2 days and think the market had to do what it did late yesterday...finally, or be a complete dud!. 

Psychologically.... quite devastating

Well,  at least we cleared the mystery of yesterday's rally.  It was mere short covering and that's the way we approached it in yesterday's Journal.   As soon as it was clear no follow through was going to take place, the end of day selling rained down as the possibility noted.  Today's action will make anyone think twice about chasing any "financial led" green day in the future.   Other than the downgrade of CSCO/INTC by UBS earlier, there's really no earth shattering news that could be responsible for the market action today.    To see all of the gains from yesterday evaporate and then some has to be devastating to anyone who's either been bottom fishing last little while,  or concluded we have seen the bottom.

On the commodity side, we actually had some nice upgrades in the Coal and Agri sectors, as well as the news from the Steel sector.    We highlighted one stock yesterday, CLF, as the best early and fast trade for those in this steel group.  The exuberance was definitely there as these steel plays were the big early winners.   Yes,  if you're trading intraday swings, this could've been a nice day if you selected the right plays.    On Thursday, have an early look at CLR as it's 2nd well news from the Bakken acreage is out.   It should respond positively.  Toward the end though, most commodity plays just could not handle the brunt of selling from the rest of the market and caved in much of their gains.     However, we do have to conclude that we are rather encouraged by the action from the commodity sector.    Good news is being bought again and the reaction has been favourable and that's every encouraging.    As long as the overall market stabilizes somewhat, we think people are going to appreciate even more the good news from the commodity sector.    We think it's possible that we see more of the "price increase" news from various commodity industry to keep this game going.    Assuming this market doesn't drop dead, we feel there'd be some nice opportunities down the road in the near term.

For most of the plays on our shadowlist, they appear to be in the consolidation mode to digest the recent correction.    We are hoping the consolidation time can last a little longer so they have a chance of breaking out of the previous high.    We know it's a bit too early to even talk about resumption of momentum from our favourite plays but we still have to point out that they are all capable of "CLF like" action on any given day.   For now, we are being highly entertained by the market action and we'd for any change in sentiment toward our favourite plays.    This market only rewards those who make good trades.   To us, a good trade means a high probable setup and that's the only thing we are looking for these days.

..stick a fork in it...

No, we don't mean the market, that's already been taken care of for months!.  We're talking about the second well at the "Three Forks" formation for CLR!.   That's the second time we've stuck a timely fork into CLR from the start and just like the first alert, this one carried on all day.  One essential ingredient to be a successful trader is know a stocks potential and history.  What we mean in this case is we've already seen CLR rocket from $52 to about $64 on May 20th and so why wouldn't it put in such a move once again on an another successful well.    It also helps that CLR has been consolidating for nearly 2 months.   We don't need a geology background, we just needed to understand this well had stronger production potential than the first and most importantly know the stocks trading history.   Considering they didn't exactly discover the cure for inflation or something, you should look at the chart and see what it did the next day and/or week after its May 20th run to decide on what you probably should have done late or should do with it in the near future. 

As far as the rest of the market, yesterday was a whacky trading environment from the opening bell to the close.  While we're on the topic of gas, as soon as this market gets the whiff of some in the form of a rumor it runs for the hills or more like down the hill.   The late day plunge was almost comical.   We also had everything from what looks like a run on LEH to a nice move down from Coal stocks of up to 5-7% without a gap in minutes at the open to a very nice reversal later in the same names.   The only reason we alerted the potential early short before the open was because these coal stocks were either flat or up heading into the open.   If they were down already, we wouldn't have as it would be useless.  We talked about the API2 the other day and we knew what happened early in Europe, the rest of the market seemed blind to it as these stocks were about to open green.   Didn't they learn already what the thermal coal price overseas can do recently?.   Sure this was a traders dine and dash trade, but the last 2 days prove even if this looks like a difficult trading environment, you don't have to be a full-time trader to capitalize on the CLF and rest of steel move from Wednesday and yesterday's move in CLR.

As the market shenanigans continue with the LEH, FNM, OIL,  we aren't paying much attention to the market indices, but on the often mentioned $CRX.   

DJIM #28 2008

News flash 'Fed is bailing out the entire U.S. financial system'...   Ok, it's not exactly the same headline, but the message is clear.     In case you haven't heard, Fed. has announced the "unlimited" lending program for Freddie and Fannie!    Yes, once again, a crisis is seemingly averted and the market will react positively early on.   Once again, more money is being printed to fund the bailout process!   Never before has the government played such an active role in the private sector.     It was just a year ago when all the critics were saying the Chinese government was bank rolling all of their state companies and creating unfair competition with the western companies.      

Ok, we are not going to get into "what should be the right thing to do from Fed" debate here.     We just want to point out that, lately, there's a sense that Uncle Sam is stepping into dangerous territory to exercise its power.    Whatever that's being "fixed" short term, in our opinion, may have bad repercussions down the road.

So what do we do as traders in light of this news?    We don't think there's any reason to chase any of the financial companies since earning reports are on the horizon from a couple of key players.    Instead, we feel this news will definitely add more pressure to the U.S. dollar and give commodities a further boost.     On Friday, while the general market traded in a wild fashion due to the Freddie/Fannie situation, many commodity plays exhibited very steady behaviour and most of them closed near high's for the day.     We did add some positions back near the close as per our alert comments earlier regarding a firm close possibility from our plays.

We are officially into the core of the earning season as many big companies are set to report this week.   On the other hand,  we feel the recent commodity correction may be over and we are back into buy on weakness strategy.    Haynesville Shale plays look the best right now and we'd concentrate on those the most.    Both Agri'. and Coal groups don't look too bad either and we'd be monitoring for some good setups and/ or news.   The only group that is still iffy at the moment is the steel group.   Other than CLF, we'd like to be more patient with some of the other names such as X and RS.     Earning reports will definitely bring out some surprises, we'll alert when we spot a good opportunity.

..okay, what now?

So far this month has been nothing but a non-stop elevator ride.   We'd like to say we're stuck in an elevator and the market is consolidating, but this has been nothing other than one continuous up and down daily ride.   Today should be no different as it's June retail sales time, PPI and later it's Bernanke's congressional testimony with sidekick in tow.   By the end of the day these guys will feel like the baseballs from the Home run derby.  The market may also feel such after Bernanke delivers new mid- year Fed forecasts.    We've already had a rough overnight in foreign markets in anticipation, including the dollar falling to record lows vs. the Euro.   So nothing new today, just more of the same?.  Maybe that's wishful of more of the same up and down routine, sooner or later all the ugly ducks line up and the market gets spanked hard.  Today, we have more than a few uglies and potential for more as the day progresses.   Everybody is waiting for that big capitulation fear day.  Fortunately or unfortunately, it may not come unless the commodities-energy's get a beating simultaneously. 

As far as the trading day Monday, it was more of the same song we've been singing as our commodity plays make us oblivious to the popcorn market, specifically the Financial stocks which require popcorn on hand because of the entertainment value they provide.  The Coals exhibited early strength, a few getting 5-7% moves before a noon slide back.   Still, all managed to finish green.  The Ag's performed well, we're concentrating on the POT alerted Friday as a buy and MOS these days only.   The news form MOS last night is very good for the group, but will probably go unnoticed in this environment today.  The news is a definite agreement to sell a Nitrogen business (1.6 bln) to Yara and will close in the 3rd Q.  Yara is the world's largest producer and marketer of nitrogen fertilizer and this transaction/cost implies the value of fertilizer assets.   TNH, CF are other nitrogen producer names here.    As far as Shales are concerned, we have more offering news from GMXR.  Considering the OS in GMXR, a 2mln offering is about 20% and we'd avoid this name .    We hardly ever say go a stock short, but one way to trade DJIM plays is to either back off the stock or short it when we go off it.    Still, a thin volatile stock like this carries too much risk for the average retail trader.  The rest of the group plays you can monitor daily upside or downside off what CHK is doing,  if there is no catalysts fueling them on a particular day.

Anyways...Careful today... 

* A few members were not receiving email yesterday, our site posts go out in bulk simultaneously from a server in NYC from our site administrator.   We have no control over what AOL, Yahoo etc do with it.    It is out of our control once it's sent and out in space.  We've seen this over time primarily from AOL email account holders.   Besides visiting site eg. before the open to read Journal, we'd suggest a more secure and dependable email address in the future.   We'd also suggest going into profile on site to make sure you are still subscribed to the page(s) you require email from time to time.

Crosscurrent....

These days, market is going through the sort of volatility that leaves a seasoned professional even shaking his/her head.   It is simply tough out there.    Owning any major positions overnight is a practice that generates a high degree of risk these days, this is not necessarily true with commodity stocks as this story continues.  The one thing investors have to worry about these days is that the company that issues stocks in his/her account, will still be there when it's time to sell.     Is it that bad out there?   It really depends on who you talk to.    However, one thing you have to stick to your mind is that "anything is possible"!     The dumbest way to avoid any disastrous stocks is not diversification, it's simply to stay away from troubled sector all together.     There will always be signs when a stock/sector is in trouble.     In the world of stock market, action definitely speaks louder than words.     There's no need to check balance sheets or read analyst report or any other due diligence as a trader.    When a stock/sector is falling hard, stay the hell out!

Right now, we have basically two main crosscurrent that are driving the market up and down in a wild fashion.    One crosscurrent is the current financial crisis with FNM/FRE as its nucleus.     Insolvency of banks is something we haven't heard of in a long time and it's a reality today.     When was the last time CNBC commentator advised the audience to check their financial account to double make sure it's protected under FDIC?    Oh yes, this world has come a long way since the establishment of capital system.    Right now, the government, the financial company executives, investors/trader and the entire system is being tested!     The other crosscurrent, as you may have guessed, is the energy prices.     When oil is down nearly $10 early, the ripple effect is felt across all of the commodity plays.   One thing you may have noticed was volume was not anywhere close to what we saw in the early July slide.  End of day may looks different now as buying came in coal stocks especially.  There was some inexperienced panic in the shakeout,  it didn't come from institutions or those who believe what we believe and that this fast 10 buck oil drop was an anomaly and that the commodity boom is not retreating.   We crossed this in the forum yesterday as an opportunity.   The come-backs by Coals was just simply amazing off the lows.

As a trader, all we can do at this moment is to realize our own strengths and weakness and determine how we can approach this turmoil riddled market.    Volatility and high degree of uncertainty can screw up probability of a good setup big time, so we choose to play with a much smaller size in order than usual to minimize the potential risk.     If you must trade, cutting the sizes and number of holdings down in this environment will prove to be crucial.     Remember, when the market is extremely tough, the main theme is survival with some occasional good trades.

As far as sectors go, we are still sticking to the same old theme.  Coals, Shales, Ag, Steels.  This order of preference can change from day to day as you know.   We would be however, keep even a closer eye on energy prices and change in sentiment.   Our trades remain manageable, meaning sizes are not over the top and the number of stocks is easy to sort.   Also, as everyone else, we'll be glued to news front to monitor the saga of this financial crisis, sometimes with popcorn!

..July fools?

Last time we had such a market gain,  it was back on April 1st!.  Is the joke on us again?.  Maybe not for the next week, month or so,  maybe even a 500-1000pt run as last April to the May's highs is in the cards , but the chances are still greater we're going to test these recent lows all over again.   This week, we said everybody is waiting for the big capitulation fear day and it would not come unless the commodities-energies get a beating simultaneously.  That same day we had a market down big time at the open and soon after we saw a beating of crude in a volatile trade that took all of 10-15 minutes and than a significant market recovery.  Of course this takes Exploration & Production Shales, Coals which are all energy related down.  Wednesday, we had more of the same as Oil took it on the chin again.  Include favorable earnings from WFC and INTC and the market had all the ingredients to run.  Times are different and a big capitulation day may never come as expected,  maybe there was enough fear Tuesday morning with the Indices down sharply followed by a historic fast slide in oil that may be enough to trigger a nice move.  Not a nice move as in coast is clear for months to come, but just enough to get us through the summer!.

As we said before the Wednesday trade, you have to keep a closer eye on energy prices and sentiment.   We all saw the new found volatility Oil can give just the day before and the damage it could do on commodities in a very short time frame.   Right now, following a 2nd day of oil dropping,  the sentiment is definitely a lower Oil and you need to know the ramifications of such in specific groups.   If you got greedy and did not take the 5-10% gaps up on coals such as WLT, PCX thanks to the ANR deal, you probably blew it all once the oil/ energy inventories came out.  Two mistakes there were possible as a trader, one is you got greedy in the first place by not selling the gaps and the second is you weren't paying attention to oil, especially on the day of inventory numbers.     Simply, the sentiment changed and we're not going after the Shales, Coals, Steels the rest of the week unless Oil shows the same volatility to the upside.   Only Ag's are a possibility now until we see where oil stands in the next few days as we expect some news flow.    We are simply at the mercy of Oil even more now and we have to respect where the money flow, institution money is going this week.    We've seen in the past year how powerful a bank- financial rally can be for those individual names,  we have to keep this in the back of minds as to something we'd start to play heavy, but it doesn't mean we're gonna start this week.   Right now, we are going to concentrate on the earnings coming out.   Basically, we're looking for fresh meat to trade and freezing the other stuff we've played for now, unless a news flow catalyst appears.  Time to hit the books and get back to old DJIM basics for the time being....earnings.

A little reality check...

We know, this isn't a kind market.    We know, more than ever, we have to keep our heads cool and act rational.    We got another 200 pt+ Dow day, yet this is probably the most dangerous day to be long anything overnight.    Sure, the drop in oil price has been an excuse to rally the market, but we still have to know what lies ahead before pushing the buy button in a frantic fashion. 

Financials have had a great two day rally and it appears to be hitting the brick wall after MER's earning tonight. Citi is more important in the morning.   Yes, the JPM/WFC reports were inspiring, but don't forget nobody ever put those two in the "Citi/FNM/LEH" category.    In other words, what's good for JPM/WFC does not necessarily translate into good thing for other financial companies.    As far as we are concerned, this is nothing more than a relief rally or short squeeze.   The poor performance today of past leaders AAPL, RIMM is also not very inspiring.    Also, we just couldn't stop laughing about SEC's new measurement against "naked short selling"!     We guess FNM/FRE had a little more influence than OSTK attempts.  Lol     This is a bit pathetic, still!   In actuality, short selling only plays a minor role in the decline of these financial stocks since majority of the shares are held by mutual funds and "long only" institutions.    Is it a desperate measurement to stabilize the financial market?   Maybe, but we'll see about that!

Commodity stocks simply got whacked today, there's no other way to describe the action.  This one was not like the other days, this one had volume behind it and the 'domino effect' ruled the day.     We warned further before the open, these commodity stocks were no place to hang around in with a fast falling oil price.   What does concern us quite a bit for the near future is the change in sentiment among traders toward the commodity group(s).    Basically, twice now they've beaten senselessly in as many weeks and this will create a high degree of fear for those who are playing the momentum game.     We are definitely going to stay shy of these groups until the volatility subsides and action stabilizes.

Have we mentioned that this is a tough market to trade recently? Lol     One thing that you can do to minimize the risk is trade extremely small/ limit number of holdings.    When you trade a tiny size, any change in price movement, you would not hesitate to get out quickly.     It's just human nature as it's easier to deal with a smaller loss.    By all means, if you are not comfortable trading the names altogether, then stay out and park yourself in cash.    Being in cash is the most conservative, yet most effective approach to a volatile and dangerous market.  Don't be frustrated when you see the Dow up nearly 500 in a few sessions and you haven't done much.   Do you really want to hold any financials overninght?.  We don't, we know new opportunites will present themselves shortly.

In AH reports tonight, MER/GOOG/MSFT all disappointed investors to a certain degree.     Tomorrow, with option expiration, it's likely to a heck of a volatile trading session.    Also, we have the big bad "Citi" to report in the morning so things can get ugly.     For now, we are playing this waiting game for the next earnings winner as expressed yesterday.    Yes, we haven't used that term in a long time, but it just seems fitting now that none of the recent plays work with a sliding oil price.      Really, all we need is a couple of good earnings winner to make this summer trading worthwhile.

DJIM #29 2008

It's quite simple what traders are waiting for this week, does the 4 day rally have enough follow through to signal re-entering the market?.  It's also quite simple of what are the main ingredients for this potential follow through and that is will Oil stabilize after a 16 dollar/3 day flop and will earnings continue to be better than expected, especially from the financial sector.  We've had the leading groups crumble last week and now is the time to look around and see what new group starts to lead the market.  Leadership is essential for any follow through and it's almost unimaginable to think the financial sector will lead for too long as markdowns next quarter are still a possibility.   Basically, we need a little bit of everything to sustain this move and we`ll wait it out to enter the broader market.   We hope this all leads to consolidation early in the week to trigger a higher move after a pause.    Cross you fingers.   In the meantime,  we`ll look for individual earnings surprises to trade one at a time in what is the busiest week for reports.

..bleak

Easy to sum up the earnings reports in a few choice words...big miss, downturn will worsen, quarter even worse than we thought, not immune to a deteriorating consumer credit environment.   In no specific order,  this covers the scope of what's out there from AXP, TXN, SNDK, AAPL, WB.    Not so little fish they are.   A few reports out there are decent, but most likely will be lost within this mess.   What we do is turn a blind eye to all this as we have for most of 2008 and concentrate on commodities as Monday's trade was not bad at all.

Ag's-chems, the only group we had on radar last week, we noted a 20% increase in certain prices coming and said to watch for news flow stemming from it, including EPS raises.  Yesterday, we had a big EPS raise from JPM on POT and this exploded the entire group. JPM also raised CF.   MOS CMP were the other names noted last week and they both joined in.

Coals, this was interesting as London API 2 prices were dropping hard early in trading overseas, as much as 5% taking coal down to 178/tonne.  Soon a report hit the wires that MTL, Russian biggie was interested in getting a piece of an North American coal.  We have discussed this in the past as an important part of the coal trade as CLF was rumored to be one to be eaten.  This report included the PCX, MEE, FDG all DJIM coal plays.  This is no surprise and the move may have been exaggerated, but we'll take any catalysts to make these plays look better again.

Steels Shales,  it is no surprise these caught on with the commodities above and a higher oil price.  We have STLD with good earnings this am.   We haven`t changed our shadowlist,  we`ve had no reason to and yesterday could have a been a profitable day if you know how each play connects and to what.  Still, this a traders environment and we can`t say with confidence these groups are out of the doghouse for those that want a longer hold than a few hours.

What`s bad for the AAPL and the whole broad market, is probably better for all our commodity plays as money has to flow somewhere away from the troubled groups.     At least,  this is what we hope for in the short term as we simply turn a blind eye to all the noise out there today and concentrate on what we`ve been looking at all year for a possible trade again.   We have no choice,  it`s is bleak out there and a follow through from last week looks to be roped in.

.

"Defying Gravity"

Well, this market has stunned us again!    Going into today, no one, absolutely no one, expected to finish the day in the green, let alone up 135 points.    Frankly, we are more puzzled than concerned about this market.    Given another hour, perhaps all of the companies that were down big in AH last night might have had a chance to finish in the green.    The only logical explanation to this is that people think all of the bad news has already been cooked into the current price and things will not get worse.    This is where we get puzzled.   When a company guides its future quarter down, it always leaves room for potentially more downside.    This is understood by everyone and most of us tend to trade on this assumption.     Maybe, an irrational explanation is that people are just so sick of bad news and they actually buy things instead of dumping for a change.    Is this just messed up thinking or just lame?   You be the judge!

On the other side of the spectrum, all commodity plays got rocked again!   This is undoubtedly due to the weak oil and natural gas price.  The reason for the decline in energy prices is that apparently a hurricane which is suppose to hit and disrupt the supply of oil/gas just won't happen anymore.    Of course, we have to respect mother nature and the trading action associated with it

So right at this moment, we pretty much have no plays at our hands.    Commodity won't do much unless energy prices stabilize and we don't mean stabilize for a day.    The trend has to stabilize or otherwise any attempted rally will be squashed quickly, as we have seen from recent coal, shale, steel action.    Agri plays are at an interesting juncture here as POT will be releasing eps on 24th and both MOS, CF releasing their earnings next week.    We will be following their action very closely.

For those that are just dying for plays, there are FSYS and RBN, both made a new closing high today.    These are couple of plays we played in the past, in an on and off fashion.    We are simply pointing out the fact that they made a nch and you may want to keep an eye on them in case they gain continued momentum from the nch. ILMN AXYS had pretty good EPS and may be a consideration at some point,maybe today
We are still waiting for a shining eps winner to come out and we are being patient for just that. The smaller caps will be coming soon.   We aren't going to step into the "regional financial rally" crowd as that's something we'd still want to avoid.

...bring on the small cap earnings...

Again, money continued the shift into financials from energy.   There are undeniable spurts of heavy distribution days since early July in anything energy related,  you definitely have to be careful and not do much, only trade the intraday moves if you want go into these groups.  The flip side is upward momentum in financials.  The bad news continues, but seemingly everybody sees a flower in the weeds.   Yesterdays, late day was ignited by an influential Deutche bank analyst who said his bearishness on the banking was reduced over the past week.    "Bad results are good when expectations are so low", he said.  This is not our trading strategy and we'll just wait and let this dry, we'd love to short a few of these puppies and probably will very soon.  It seems very unbelievable that all of a sudden every mom and pop investor sees it the same way as the analyst.  This seems too orchestrated and bigger funny money is involved in this move.  It's all a bit strange. 

Ag's, it's a big day ahead as POT reports and no doubt will beat and raise.  The question is how much has been baked into the stock price, on the other hand below $ 200 should allow for upside on good numbers.  We gambled a bit at the close for an early morning trade.   The problem with this commodity sector is how much emphasis the price of oil/gas has on it.    A looming strike at some plants has a cloud over it as well, any agreement will positively affect POT.    Potash makes potassium-rich fertilizer and improves the taste, nutritional value of many crops and with many parts of the world having their 2nd meal of the day finally,  while we have as many as we want.   Instead , natural gas prices is used in potash production affects this groups stock price more than it should.    It's not exactly coal or shales is it, these two don't exactly have anything to do with rice and corn do they?.  Anyways, we'll have a good look at Potash and its neighbour stocks.  A good report to go with a rising oil price could be a good - great combination to work with.

A few small cap earnings plays emerged...

AXYS,  we' ve had this one on DJIM before, unfortunately this eps winner doesn't hang around for an entire quarter.   AXYS, reported another strong Q as sales grew 40% y/y to 60.3mln, EPs .54c beating the street estimates of $56mln/.48. Backlog was also a record from DOD programs and is same arena as FLIR. Traded from $66 to $72 and now on our shadowlist.

ILMN,  she's back!,  it seems every Q we jump on this ones back.  Yesterday, we bought the morning pullback, $88's and watched it climb to over $92, a nch.  Remember don't chase so fast, let it come to you.   This was another great Q with .04 eps upside and a 30mln increase over the mid range estimate and improved guidance.  Everything is on track at ILMN and being in the healthcare tech sector, growing genetic anaysis market its not a bad place to be in.

..bankroll'over'

Every sector returned to it's true colors and we actually enjoyed it as reality had to sink in sooner than later.  The amazing bank run of irrational exuberance exhibited the dangers of holding this junk overnight as the sector fell almost 7%.  If you look at a bunch of charts you'll see our alert note of a possible top Wednesday morning could have yielded a nice return so far no matter where you turned in the group.  Unfortunately, we're not big on shorting and prefer to have patiance and wait things out,  still we hope this has more leak as we've shorted a few banks for a quick flip.   This may be the easiest, safest trade in a difficult market ..opportunities are minimal and/or dangerous as we close out the month.   The only loop hole available is to trade what we've always preached and that is earnings winners at or near NCH's.  These are the only things we'd be comfortable holding overnight  in size.     AXYS, ILMN noted before Wednesday's open have provided such the last two days.   Simply, we/you have to be very selective in your picks now until leadership shows up in something other financials.   Only other option available to find an intraday play such as EQIX,  too bad though you won't find many that go up $4 in a few hours as it did. 

Staying cool, calm is money in the bank,  trading out of boredom is the demise of many a trader. 

DJIM #30 2008

Finishing up the week, we couldn't help but feel there was something rotten about this market, or the market action in the past few days.   Guess, the market being down on the week almost every week this summer just doesn't smell good.  Oh yes,  you can always find intraday plays that can fullfill a trader's needs and there hasn't been shortage of that.   The problem, we are finding here is that those plays can change from financials to commods to techs to anything else on a daily basis.    Basically, as a position trader, who'd want to carry momentum on a particular sector or play, there's simply no such opportunity.

Overall, this market is still trying to climb out of the low it hit in middle July.   It's definitely being helped by the recent decline of energy prices and renewed confidence of financial stocks.    Well, the only catch we feel here is that any trend of declining energy price and renewed confidence of financial stocks will be short lived.   Of course, only time can prove what will actually happen.     One thing is for sure though, so far, this earning period has been a disappointment, across the board.   We just haven't seen an eps report which gives us the urge that "we must buy this stock"!     Yes, reports like ILMN, AXYS or even VISN are playable, but none of the reports that we've seen can give us that multi week drive we were looking for.   The only saving grace so far, is that we still have lots of small and middle cap stocks to release reports, many of our recent group stocks starting this week. (see earnings dates link)

Commodity plays,  you got to either love them or hate these battered groups.   Right now, most of us will probably be in the latter camp.   Every mini rally attempt always ended up in a disaster a couple of days later.    This of course has everything to do with the decline of crude oil.   The inability of a bounce in crude just seems to spread out the fear onto every other commodity sector.    For example, the great POT eps report couldn't ignite the agri. sector, yet the coals bounced of the ACI report.  long Will this last  coal move last is the simple question?.   Basically, we have to see better action all across the commodity sector and a lift in crude price in order to gain confidence back into trading our favourite names.    For now, we simply watch and use the occasional intraday opportunity to play a point or two off the fast movers.

Bottom line, we are nearing the end of July and this is historically a weak and wishy washy trading environment.     What we focus right now is finding bright spots in the earning reports until we begin to feel we're back to a comfort zone in this market.   Essentially, all we need is a few good reports to carry us into the fall trading season.   

.."cooked in"

......" baked in",  whatever we call it,  it's the main reason we traded these stocks in the first place in 2007-2008.   We're not disappointed or surprised by the lukewarm response to excellent earnings by the WLT, MOS, CF and probably more in the morning.    These stocks were not only hot because they just happened to be in the bubbling commodity space,  they were hot because they were going to produce excellent earnings in the Q`s ahead.    Basically,  our intentions, as always is to get in ahead of the herd and we've done it with the PCX, ANR, CMP etc..  We took advantage of the numbers we are seeing now from the commodity stocks in the weeks before!.   The point is to get to the party early enough.  We can`t be surprised to the reaction now,  we just need a catalyst such as a weaker dollar, higher oil to go with these stellar earnings now.    Simply, earnings won`t make these go by themselves as the playing field has shifted.    You now need to writedown a few billion less than expected as the banks/investment firms have to get upside off a report.   What a wonderful world eh!.lol.  Anyways,  the sentiment has changed and you can't hop on these earning plays just because of the headline.    You will most likely be holding a white flag after you buy too high, too early.   Beating well above consensus means diddly-squat initially,  just look at the numbers below.   At this point, we'd wait for the 'late to the party' to exit and for the CC's to be over with before even having a thought of re-entering.    This could be an excellent opportunity to get a piece at these prices or lower in the days ahead,  but we need an extra catalyst to hitch a ride.

Mosaic beats by $0.24, beats on revs ,Reports Q4 (May) earnings of $1.88 per share, excluding non $0.05 gain, $0.24 better than the First Call consensus of $1.64; revenues rose 105.8% year/year to $3.47 bln vs the $2.85 bln consensus

CF Industries beats by $1.42, misses on revs, Reports Q2 (Jun) earnings of $5.02 per share, includes as $0.92 mark-to-market gain, $1.42 better than the First Call consensus of $3.60; revenues rose 36.8% year/year to $1.16 bln vs the $1.21 bln consensus.

Walter Inds beats by $0.37, beats on revs Reports Q2 (Jun) earnings of $0.94 per share, $0.37 better than the First Call consensus of $0.57; revenues rose 24.8% year/year to $370 mln vs the $304.7 mln consensus.

As for the market, the easiest and safest trade discussed late last week is happening.  This stuff is radioactive and we're not swimming (buying this market) into the dirty bath water all around you.  Thank you, MER!,  you may dilute (shares) yourself by 45%, but now you're so transparent