..revival or not

As we said, fooled once, fooled twice... and you become hesitant to enter into a market because of expectation number 3 that the bailout plan will happen sooner than later.   To us the 'bailout' trades have already happened.. up and down.   No matter,  if this rivival is passed....who cares!.    Well, of course we care for the longer term prospects, but as traders, the reactionary trade we `ve been seeing may no longer be there by the time the bill gets the vote.   The 5% reflex rebound erased the post vote losses and all it did was probably allow shorts to think if the markets extend higher,  they`ll get another opportunity.   We`d feel better if this move didn`t take a day,  we just allowed for a pullback.

As we've pointed out the last few months, biggest losses in the commodity sector happened in the first few days of a new month.  We are here again and with the probability hedge funds are faced with huge redemptions after a horrible September,  we think we may see heavy selling again this week.   We`ve been saying the steel trade is over for awhile and now we think the Coal trade maybe the next victim as things are deteriorating (including the critical China demand).   After today`s rebound, commodity stocks may have put themselves into a position to be sold off hard.    It could be argued that Monday`s 20% declines in commodity stocks was the sell -off,  but we think there may be more in store. 

There is unprecedented strain,  besides the obvious problems in the credit markets, equity markets,  we have signs from it spreading all over....resource companies bailing out on deals (eg Xstrata- Lonmin) , huge construction plans stopped in Moscow by a company.    Simply,  day by day, we are seeing a slowing down worldwide,  the noise is widening across every aspect of daily life. 

..how 'bout bailing out the traders..

As all of the focus is on the bailout deal this week,  we think traders also need to be bailed out from the market action lately.   It's just extremely tough to gauge market sentiment day to day, hour to hour.    In all honesty, whether the credit bailout deal is passed or not,  nobody really has any clue as to what will happen in the weeks ahead.  It seems the focus finally is going to a worldwide slowdown and the consequences of such.

Now that September is behind us,  we can look back and say we just had one of the rockiest months ever.    At this point, we are simply monitoring the market to see what sectors to avoid coming into the earning season.   Oh yes, the credit crisis may have stolen the show in the past few weeks, but earning movers will take over once companies start to report in mass and/ or miss in mass.   MOS', report will likely get the whole Ag-Chem sector downgraded and we'd watch for a potential fallout to other commodity stocks in other sectors.  Also,  IBM dropped 6% today on the fear of profit worry and this may be the trend for many big corporations that have a global exposure.    Unfortunately for us traders, it looks like we have to adapt a new mentality in our trading strategy.     Basically, we have to incorporate market pessimism into our trading strategy to the fullest.   Another alternative is to go back to our early days and look for undiscovered companies that are safer, quiet plays such as ICXT, EBS, another is SQNM  to avoid the crazy daily wide ranges of stocks we're used to. 

Bottom line, we are basically getting a break today and tomorrow until the House decides the fate of the bailout deal on Friday.  In either case, action should pick up toward the end of the week and perhaps well into next week.

..waiting game

The waiting game is on, the only question now is will it be the crying game for the market by Friday's close?.   If it is the crying game, it would set- up for a memorable close and/ or Monday morning.  The consequences from the combo of a jobs report-unemployment # and the lunch time(?) vote should bring volatility hour by hour,  especially after yesterday's pounding!.    Both could be catalysts or just one,  it could go ugly before it has a chance to get good later.   Just roll the dice, folks, it could be one crazy day!!.    Thanks to today's bleeding and considering we're back to or lower to panic levels from last week,  we're back into the possibility of a reactionary trade to the vote.   Take into account the sell-off in commodity stocks last 2 days and with say a higher oil day,  maybe lower $USD and we'd look here for a long intraday trade.   This is just the reverse of what we've been in saying before Wednesdays trading day of the possibility of an imminent early October swoon in commodity stocks and than a fallout from MOS to other commodity sectors.  The $CRX decline of almost 10% was right up there with the previous early month beatings this summer,  if not the biggest.   Congrats, if you went short on the idea of another big fade, some of those sector stocks are off 20-30% in a few days and that excludes the Ag-Chem stocks.  The pace of this action suggests not only a worldwide slowdown, but a complete halt to all activity and that just won't happen, so be prepared to go long for a trade today or quite soon .  Again, today is all dependent on the reaction to eco data/ 'vote' by the broad mkt.

An early trade possibility is to look short Russian stocks for a day, eg WBD, VIP, MBT, maybe even neighbor stocks like CETV as the Russian mkt is feeling pain once again. 

DJIM #40 2008

It's been exactly five weeks since the labor day weekend and we've had some extraordinary headlines and action from this market ever since.   Was this all expected?    As far as the financial sector goes, we all thought it's due for a real shake out and we had exactly just that during the last few weeks.    Sure, the drama isn't exactly over by any means as the focus is moving on to Europe, especially this weekend.   The crying game conclusion to last week has spread over to Europe this morning big time (5-7% losses), as it takes in our losses of over 400 pts. after their market closed Friday,  plus their own failings over the weekend.   The more we are seeing what's happened,  the more everyone realizes that this is a pure global phenomenon and this is going to change view's on things forever when the crisis is over.  It's been 14 months now since we can say all this noise started and last week saw some of the biggest weekly broad losses ever....CAT 20%, AXP 21%. GE 15%  AA 18% for the big monsters....ECA, PBR, RIG, SU all over 20% in energy sec, TS RIO TCK VCP 20-30%++ AAPL, SAP 20%+...and so on.   You can clearly see nothing was safe!

What probably shook us the most during the last few weeks, is the deterioration of confidence of the global economy.    Not only commodity based plays getting destroyed left and right, many if not most of the international conglomerates are getting beaten down senselessly as well.     We are seeing the chain reaction to just about every sector.    So, this bad mother of all market crisis is affecting assets in all sectors and all over the globe.    What does it really mean to us traders?

First,  we think it's a good thing that assets ARE being revalued and discounted for whatever the recession we may receive in the near future.    The last thing we wanted is that market does not move in sync with the economy.    Here's the thing we have to remind ourselves, "market always moves ahead of the actual event"!    While we all wait for market to come down and values of stocks to get cheaper,  there will be a point that stocks don't go down anymore.     This happens when a combination of bad news or events that don't move down the market.    By then, we have to be ready for a potentially powerful bounce.       Yes, an idea of a bounce is that nothing goes down forever and we have to play that probability.    In the meantime,  we have to do everything we can to preserve our capital and let others play the daily casino moves.    The worst thing we want at this moment is to lose our discipline and play stuff for the heck of playing or boredom.    Know your trading ability and know your own probability of making good plays in this kind of trading environment.    If you've always done great in the time of great volatility, than by all means, go crazy    If you are like most of us, it's better to stay on the sideline for the most part.

We are officially kicking off with earning season in the coming week.  Will it even matter is the big question?.   It'll be very interesting as we monitor the market reaction to company's reports and guidance.     It may give us clues as to which sector is beginning to get money from the market, if we are to getting a reversal started.   As far as today, we would watch for a late day reversal (if) in Europe to move the market here for a intraday trade. 

Is it a keeper?

Is the reversal the beginning of stock rally keeper?   Well,  it seems the only ones not giddy by the close were DJIM traders and Art Cashin.  Even the biggest bears in blog land seemed to have changed hats!.    Honestly,  it was quite disappointing to see the market rebound to do another 1 hour rally,  we've seen enough of them lately only to be tossed back to reality only a few hours trading hours later.    Before Friday's trade,  we said we may just get a memorable crying game come Monday and it was definitely that as panic spread all over the world.   Unfortunately ,  we basically moved more than everybody else being down 8% on top of the 400+ drop on Friday after the 'vote'.     What we did is basically even out our losses to the worlds by jumping back up 300-400 pts.   Now we wait for reaction across the world indices in the morning to see if anyone was impressed by the reversal here.   Probably not!.    Give us a co-ordinated worldwide rate cut by week's end and we can talk about a decent short term rally,  until than all that has happened is we're just a little more open to trading long possibilities this week.    We're not concerned about catching a bottom,  especially in times of incredible volatility...but , we are anticipating a massive rally sooner than later as the ' trillion' ++dollars  we've talked about starting to come off the sidelines.   The VIX reaching mid 50's implies the SPX could be 50% up or down over the next 12 months, it basically shows what the expected move could be and its quite a range of outcomes.  That's a potential massive rally.    Besides a coordinated global rate cut,  we need to see short term credit markets see reduced stress, improved liquidity after the TARP,  but we need to wait for this to show signs before we can have any rally of substance.    We also need to see leadership emerge and 1 hour doesn't do it!.    Anyways, we're closing in on a lifetime golden opportunity, but we're not there just yet,  just hold on some more before you get your Prince albums out and "Party like it's 1999" all over again!. 

Which inning is this?

We wish we had an answer!    What we know now is that if anyone bought yesterday's late rally,  he/she would be in a world of pain at this moment.    A glance at charts shows most stocks finished below the afternoon lows that proceeded the late rally, just like the indices.  Perhaps, had market closed at the low yesterday, today might have turned out differently!   Well, now we will never know!   Another problem arising from the action last few days is those fooled Monday will be more hesitant to enter the next time.   The problem with the market these days isn't the lack of solutions.     The real reason why participants are liquidating is the combination of "no confidence + fear + forced selling"!    The most important aspect of those three component is still the lack of confidence!    If very few believe the bailout is going to work and very few believe the system still functions, how do you expect people to step back into this market? .  We need a co-ordinated rate cut right now, it's a start.   Today was a disappointment it didn't happen pre-market.  Will a rally last if it happens, that's the big question!.   The SPX must hold around 1000 showing support or we are in what you call a secular decline, not a cyclical bear in a bull market.

Before, we understand the market action,  we have to understand the psychology behind those who are selling or buying!    Right now, the total lack of confidence in our capital system is forcing people to stand aside until there's a sign that (read this) CONFIDENCE is restored!     There's no point analyzing technical charts or fundamental aspect of a stock when there's simply only one trade out there, SELL!   The buyers, they're cherry picking  for a harvest one day far removed from today.  Now, one of these days, selling will slow down and we will reach a point where enough is enough!    We just don't know when that day is and how soon it'll come.    What we hope to see is that that day comes on a day filled with bad news.    

The lift of the short selling ban is coming up in a day or two and it's going to be interesting to see the effect of that.    Like we have said before,  we are dealing with an unprecedented  level of crisis on a global scale.    Anything is possible at this moment and the best thing we can do at this moment is NOT to speculate on an outcome whatsoever.     We absolutely have to let the market itself play it out.     When stocks' behavior becomes logical and sensible again,  that's when we apply our skill and strategy to make most out of it.    If you have been doing nothing, you are winning!.

..Stop the insanity!!

Just when you think you've seen everything,  you're left with a day of dizzy spells from pre- market to the close!.  The extreme volatility is a sign the market 'is full of it ',  full of news that it can't digest properly as it's stuffed into you at every hour leaving you choked up!.    The VIX remains at elevated levels and down volume most times looks sickly,  yet these signs of a final sell- off are not there yet.    Seller exhaustion or capitulation are not there, despite the volatility today,  the selling is still orderly with buyers coming in off and on during the day.   Stocks remain caught in the selling pressure,  it's simple as that as all seem to be waiting for that final...get me out now, no matter at what price! 

A few developments outside the credit, liquidity issues,

• MON,  reacted 'well' to 'average' earnings and this spread to other names.  LNN, as well.  At this point, if the mkt reacts well to ho-hum earnings it may be a good sign.
• IBM, raised guidance.  This takes some stress caused by SAP's numbers on the tech's.
• MT, the steel giant re-affirmed
  

The hope here is let the market turn it's focus away from all the 'bailout' stuff around the world ( to some of the above) and let it take it's course of working through the credit markets.   Also,  if the financials show signs of shaking off the lifting of the shorting cap,  it could be a huge positive for trading day as well.

..".snowball effect "...

....."Just when you think you've seen everything"...yep, we're using that line again!..  One thing is it has become easy to calculate percentage moves quickly on the indexes with the DJIA and SPX hovering around 10,000 and 1,000 this week.  That's the only silver lining ..lol...   We mentioned in alerts Wednesday the technical levels to watch and when we re-visited 970 today again, it became clear 950 was in it's sight.    The inevitable drop occurred as 950 was cut and SPX fell another 4% in about 40minutes.     Was this the.., " it's simple as that as all seem to be waiting for that final...get me out now, no matter at what price!" .  We wish it was, but the fact it happened in only 45 minutes makes us wonder who really was around and/or had the chance to throw in the towel or call their brokers...finally?.   No matter what happens Friday, why can't they just mark Columbus' arrival to America by closing the market Monday for a day!..   How ironic would that be?.   Give us a 3 day break,  give the global leaders the time to work out something right for once..     Anyways, we've wanted the Armageddon gap,  but we just not might get it out of the way tomorow.    We may never get it and we never need it if we keep losing 20% a week.  One day,  we just may get a small gap down and just keep rising.     It's a hard call,  every rule seems to have been broken and historic evidence may longer hold.     Don't let overnight Global markets fool you as they' re only riding our coattails here.   We should ride their coattails and halt our markets!.    One thing to watch is the Euro mkts during day, we use the $TOP on our platforms.    A key later might be the LEH CDS auction,  GE won't be as they just guided a few weeks ago and even if the world seems to be torn apart in that time, it's doubtful they will make too much noise as meeting targets from 2 weeks ago is not exactly the highest bar.   

Flip a coin for Friday,  if something worthwhile starts to show up, we'll alert.  Otherwise, it just may be more of the same volatility with nothing coming out of the day by close.

DJIM #41 2008

It seems every weekend we get some "earth shattering" news that can be potential market mover.   This time around, we get an apparent  "world rescue plan"  that's being deployed by various nations to curtail the panic that's been spreading all over the world last week.

Currently,  futures are up a healthy amount and frankly it just feels eerie to us.   Why we feel this way should not come as a shock to anyone because we have just finished one of the most turbulent, if not the most turbulent trading week ever experienced by a living soul.    The S&P 500 has closed down every single day since the start of the month.

With Friday's apparent reversal from that dreadful opening, many market participants are quickly calling the bottom is in place.   Although we wouldn't disagree nor agree with that notion so quickly,  we think it is a good possibility.   However, here comes the more important phase of  "testing the low"!    Whatever happens during the next few days,  you'd still have many many players refusing to believe we've just hit the low and they'd act that way with their action.     In our opinion, regardless whether Friday's low was the low or not,  it's still good to see that kind of climatic action at that level.

What are DJIM traders look for then?   If assuming the financial stability is getting in place and that's a big 'if' at this moment,  we'd turn our focus back onto the economy.     For some reason,  the potential downturn of the economy is being largely ignored by the market participants at this moment.    Of course,  we don't blame them because we are dealing with a huge crisis here and confidence needs to be restored in many areas.    Assuming,  we do get enough confidence back into our capital system and we avoid anymore large meltdowns from financial institutions,  we'd redeploy our radar onto the earning front.     In the coming weeks,  earning news will dominate the traders' screen along with the usual noise.    What we are going to be look for is quality earning reports.     Oh yes, we are definitely going to be lowering our expectation on earning reports this time around.     We are going to be looking for reports that still carry an optimistic tone  given the circumstance.    Relative performance is going to be the key here.  

At this point, there shouldn't be any overvalued, over inflated companies out there so it will make our buying decisions much easier.    Stay tuned,  we feel we won't be sitting idle for much longer.  As far as the immediate trading day, we'd look at it as just that , a trading day with the bond market closed.    Without the bond market things will not always seem as they are, still you can't curb buying enthusiasm on any good news after such a miserable streak.    Almost all sectors will be up early, but just like Friday, we'd concentrate on the Ag's-chem,  high beta's if we're thinking longer than one day.   Watch the $CRX for commodity plays off a potential weaker $USD, a stronger oil for energy plays for intraday trades,  the $TOP for action overseas to watch for market turns here.

..today is 'history'..tomorrow is a mystery

The Calvary consisting of  Treasury,  Fed,  FDIC has been coming in shooting bullet after bullet,  finally today the arsenal finally hit in one 936 point historic strike.   Of course,  it couldn’t have happened without its allies across the pond getting it all started with their plan.   The biggest bullet is the anticipation of the one to be announced tomorrow,  this was the late afternoon rush higher with the prospect of  US government buying preferred equity stakes to get at the credit crisis.  This should unfreeze the big freeze going on now in the credit markets.  Actually, it better..it must!

A tremendous bounce off a probable climatic Friday continued, unfortunately this gigantic move today has come with government intervention tomorrow, we all know to well these interventions have led to sell- offs.  Run today,  sell -off tomorrow is a high possibility now considering the magnitude of the move into the news.   Bottom or no bottom, today’s 20% ++ moves were too fast,  no matter how beat up stocks have been…. 20%-30 is really not that much considering stocks are down 50-100% in months,  if not in a few weeks.  It was early October that big caps were falling 20% in days..CAT AA,  not to mention last weeks beatings.

Today is possibly once again another opportunity for shorts to line up earlier than they had possibly ever dreamed of.  So, is confidence restored all of a sudden?.  Hardly,  that’s why it is just a relief rally until proven otherwise.   Bond markets closure today also had an effect to allow stocks to run wild, a lower USD and higher Oil possibility noted heading into today’s trading day also played a vital role in the fever, especially in the commodity stocks.   As pointed out Friday morning,  we always favour high beta stocks in any rally and those were some of the greatest point gainers today….BIDU, GOOG FSLR MA etc.   The only group we liked last week was the AG-Chem trade and those fared well again and are the only group near their highs from last week…MOS POT MON CMP CF.  

We have not seen any change in the steel, coal picture worldwide to get back on the wagon.   

What we need to see now,

• Improved liquidity,   watch for the spreads, LIBOR etc starting with the Bond Markets re-opening. We’re are not going anywhere fast if this bank intervention does not solve the problems.  It should, but it doesn’t mean the market will keep on flying tomorrow.

• Leadership emerge, today everything was up and you can’t decipher if and what may lead.  There has to be leadership for a market to move higher.   We all should be looking in this direction as this where you’ll want to park some money.

• Earnings,  as noted last week this is a crucial tale as it focuses on the economy worldwide.   We need to see stocks react favourably one way or another.   Considering stocks are so beat up, some undervalued it will be interesting to see how they react to their reports.   A stock may not need to ‘ blow out’ a report to move higher,  we’ll watch for stocks to move higher on just average reports to see if a trend is forming where earnings reports are cooked in.   In this economy, we’re not anticipating blow outs to move stocks as in the past few years.

More improved action needed...

Regardless how you view today's action,  we think it's a step toward the right direction.  Follow through is 'key'  this week.  Yes,  we still have some quite volatile intraday action (700+ range) to speak of and the end of day score wasn't so inspiring, especially with the Nasdaq.    But, we did have 2 reasons to sell-off,  so even if the close wasn't that inspiring,  it wasn't that bad at all considering,.."we all know to well these interventions have led to sell- offs.  Run today,  sell -off tomorrow is a high possibility now considering the magnitude of the move into the news.."    However, overall, the financial sector had another firming day.   The stability in the financial sector will drive away fear action.     The fear action we refer to is the type of action we saw from last week.    When most people act in an irrational way,  there's no point trying to make any sense out of their actions.    One positive is Monday and today, we did not get the "forced selling" late in the day from insiders/ hedgies/ mutual fund redemptions due to margin etc, as we've been seeing all of last week.

What we want to see in the coming days is for the market to really calm down from the historical week we just had.    Assuming we just averted the worst point of this crisis,  we should move on and focus more on the damage that may be caused by this crisis.    Of course, we are referring to the coming change of economy.     Tonight, we have INTC CSX DNA and morning brings JPM, KO to report earnings and we may finally get a glimpse of how market reacts to earnings this 'fear recession" quarter.   Keep in mind,  many if not all of the companies have already come down in valuation, so in spite of the lowered guidance/ reports, the actual stock may not move that negatively or may even go up.     This will be the key that we, the DJIM traders, will be looking for!

Right now, this game is fair to everyone.   No company or sector has an edge in this kind of environment and whoever gets favoured by the market will be chased by a lot of people.    We simply have to be there in the early start and not to miss a major sector move.   

Garage Sale...

Bottom line….is we’re back at Thursday’s lows before all the latest shenanigans!.  Today was just another historic headline day in terms of ‘records’ as the SPX sold off 9%.   Simply, there is little positive to say about this market as the impact of government intervention to improve liquidity is not making a difference.   So far, credit markets are showing only little slight improvements.  As we pointed out this week until it does we can’t move forward along with the other 2 points of finding leadership/ earnings visibility.    Simply, negative noise has spread to recession noise because of unknown visibility on the macro economy.   It seems we’re of the minority this week while the majority has been pumping a bottom, buy this market since the weekend and joyfully proclaiming their wisdom after, earlier this week.     Instead, we’ve kept a level head ( hell, even threw a OIH short today from $99 ) and only spoke of preparing and noting what we need to see before diving in.  Well, wisdom shenanigans have lost investors at least a sleeve off their shirts , as stocks tumble hard the past few days.   All the bullets shot by the Calvary are a step towards better days, but right now it’s still seemingly one step forward, 2 steps back. What we need is 2 steps forward  at least and this is what in part,  we pointed out yesterday…”Follow- through is key”. There is no point risking building positions back into the market until this changes. The other important part we discussed yesterday was for 2 days we did not see end of day, “ forced selling” from insiders/ hedgies/ mutual fund redemptions due to margin etc.    Well, it seems this was only an orchestrated move of allowing the markets to run fast upwards, move prices higher to only get out at better prices.   The forced selling resumed in the last hour in a fast and furious manner signalling this routine is not over!!.   This is the biggest negative of the day!.    This is only gives the retail investor more reason to sell end of the day, anticipation of what the big boys will do takes over and than we have everyone selling the market off.

Due to the crazy volatility, it is essential to stick to intraday trades, considering shares to short are difficult to find in many a commodity play,  it is best to stick to things like the OIH that are very liquid when you see action like today.   When, not if the market rallies again,  we remind to go after the high-beta stocks for the day or just play something the SSO (ultra S&P).   You can keep away from individual stocks and just play these 2 examples, both ways.   It is seemingly useless to build long positions slowly in increments as so many talking heads suggest.    You will lose confidence quite quickly after days like this following this strategy.   You will make more money in a 'real rally' sooner than later,  you do not need to catch the bottom in a stock(s) now.

Refreshing...

Even though we had more wild point swings (800pts) during the day,  the mid-day 900 SPX tug of war hold and end of day action has to be encouraging.    Finally, we are seeing some sort of bargain buying that isn't led by financial institutions.  It was positive not see the EOD "forced selling" and the battered commodity related plays didn't pop as much in the past.  Also after a few earnings reports in steel,  it seemed most doom is priced in as they had decent days from the start.   Even though we continue to think this sector will struggle for a few more Q's from a weakening demand environment,   the stocks share prices are discounting too great an earnings decline.    Actually, this is the first up day in a long time that an upwards move is not a "credit rally". 

Wednesday's late action was bad and once again everyone seemingly took the notion that no equity should be worth anything in the face of a severe recession.    Today,  apparently we had people realizing even in the worst of a recession, some of the equity prices just look pretty darn good at the current level.      Judging from the after-hour action from some of the companies we know very well,  we think market may be able to put behind this "crisis attitude" and focus on relative value, for a change.

This is good news, for us!    Honestly,  you can only go so long with this intraday sniper action.    Believe it or not, both SPX and Naz have nearly tested last week's low and both bounced off pretty convincingly.   Technically,  that's also a very good sign.    Is it time to get busy again?    We sure like to hope so and if this market does not give us an opportunity in an earning period, who knows if it ever will.

The bottom line, we are looking for relative performance among the earning reports and we don't have any favouritism on any particular play or sector.    If it's a beta stock or a boring stock that get the market vote,  so be it!    We'd expect our alert page to get more active in the coming days/ weeks.   Simply, our tone has changed towards this market as of today, we're not going on a buying spree, we're just more open- minded to go long overnight here and there and buy some dips on stocks at these levels.  The daily fluctuations, intraday day swings won't stop and so holding on tight to a buy will also become a strong possibility,  if it's not a decline starting off some negative headline noise in the markets.

DJIM #42, 2008

Just another wild week, even a modestly flat close on Friday was spun from another 7% range from hi- low on the SPX.   Based on Thursday’s trade, our tone had changed towards the market and Friday morning the investing world woke up to Buffett’s, “ Buy America. I am”.     Buffett reinforced he was buying Thursday morning,  but stopped as the markets were rallying.   The way we look at this is simply what we believe now in starting positions for either intraday or longer trades and that is buy on the dips.    This example is well- served from Fridays action,  we noted night before to maybe start some homework and this included looking back into the commodity stocks.    The morning started with a gap down and the commods‘ followed suit tracing the $CRX, OIL (OIH our oil vehicle) to nice gains till profit taking ensued around 1:30pm in the broad market.    In consideration of the daily wild swings, buying dips beats trying to catch a runaway move that can start to flop by 1:30 like on Friday.   If commodity plays continue to do act well as in the last few days,  the late day sell-off may have been another dip opportunity.    Some days,  you’ll just get lucky and forget about accumulating and just take the profits generated that day, eg a POT run of up to 10pts or any of the other nice low-hi ranges in the commodity stocks witnessed. CMP, is our safe play favorite here as it's got more going for it (diversified) as in it's salt business with winter coming.

The big picture remains, a faltering global economy,  latest U.S figures confirm recession  ( latest retail numbers, homebuilders survey new cycle low,  early October factory surveys from the Philadelphia Fed (down to -37.5) and New York Fed (-24.6).......plunged !),  hit with additional financial credit shock  that isn’t going away overnight,  despite signs of subtle improvements, thawing of the credit markets late in the week.     The severity of the damage is hard to gauge and we just have to trade around it,  even if the result is the worst recession since the early 1980’s.    The consumer will tell the tale of how long and how deep of an economic contraction this is going to be.  Right now, hope is short and shallow.  Last week’s rebound in US and Japanese stocks,  amid awful economic data, is the first sign of a resistance level.     It is encouraging that equities went up this week even as economic data continued to deteriorate.     Equity markets gained 4% for the week after the previous week’s 20% crash.  Daily volatility remains very high and the VIX reached a new record high.   

Nobody can tell if a deep Global recession is priced in,  but considering we are off 45% in global equities since October,  it may suggest it is priced in.    We discussed last week the signs that policy actions are working on funding markets,  we won’t consider going long seriously overnight till we see impact of all that has been done.    The only cushion is the price of crude,  besides the newest policy initiatives that relieve total gloom.    These are pretty powerful forces to cushion the economic fall and boost spending, but is it enough to fight all the strong negatives out there.   Unfortunately,  as traders we’d like crude to spike here and there,  so the vast commodity names get some life.   Downside risk from a further decline in oil and gas prices is much less at Oil levels here, so most commodity plays have potential for upside from their current price levels.

The only stock making NCH's these days is EBS (alerted Oct 1st),  it also made #1 IBD this weekend,  this pretty well sums up the market and the difficulty in finding anything to go long for a period of time.

A big scope of corporate earnings this upcoming week (see earnings link), investor reaction is what we will monitoring closely to give the market some direction, besides the commodity plays

Need more backfilling...

Wow,  this is the second productive day out of last three trading days.    Believe it or not,  we haven't had this kind of action since mid September.     And no no no,  we are far from out of the woods as Ocober will be a record setting month as far as redemptions go (Mutual fund industry).   However,  as we have pointed out since last Thursday, some sectors, especially the commodity groups have given us plenty of opportunities to make up some gains during the last couple of days.

As far as earnings front,  many key reports are showing signs of an early recession.    This shouldn't come as a surprise to anyone because this is largely expected.   But,  what we are witnessing right now is what we said we wanted to monitor last week, we are seeing some stocks rebounding despite a not so optimistic report/guidance.    The only conclusion drawn from this is that the stock price of many companies have already priced in the current and perhaps foreseeable economic condition.     Of course, we can always argue that the economy can get much much worse and we can head toward one of the worst economic periods ever in the history of this market's existence.    Sure, anything is possible six months and a year out!   For now, we'll have to focus what's coming up and that means two to three months down the road.   This is essentially what many,  if not most of the companies are capable of forecasting these days.      Frankly,  nobody knows or can give a reasonable count of what will happen far into 2009.    Nowadays, with the market capable of going up or down 10% in a week's time,  things will be adjusted quickly if needed.

These commods eh?   Boy you gotta either hate them with a passion or love them with your soul!   Looking at some of the movers such as, randomly CLF HK CRK PCX MOS CMP CNQ....  within the past few days, you wonder if you have been doing all of the right moves.    Nonetheless,  if you simply did some homework late last week and bought a few things off our list, either small or big,  off dips or even chase some strength, you'd have had good reason to go out for a little celebration, finally.    Given the recent circumstances,  this is a confidence booster.  We haven't alerted many stocks recently, but considering the market has stunk the joint out by 20%,  it isn't a bad thing as it keeps you out of trouble and preserves cash for days like the past few.     Today, we felt the commods' may lead the SPX (broad market) to trace the FTSE move,  this is exactly what happened as we played catch up and moved nearly 30pts on the SPX from alert.     Basically, when a lot of plays on your screen head higher near the close,  you either lock up some profit or carry some overnight.    We did both,  so we don't feel like we miss either side the next day.   If we get a pop in the morning (if morning earnings reports don't stink),  we'd be more inclined to let go more stuff into the strength. 

See, whenever this market stabilizes somewhat,  we can always find opportunities to trade.   Sure, it's unrealistic to expect everything to be calm from now on.   In fact,  we'd expect more volatility down the road.   We can handle volatility,  but not irrational behaviour.    As long as the market participants show us that they are acting in a logical manner,  there's no reason that we can't take advantage of any market movement.