..big bang theory..

..yep..the big bang 'panic' theory was thrown out the window 8:20am Tuesday.  All the ducks were lined up and out comes the mother of 'ducks' and goes QUACK QUACK QUACK for each quarter and squelches any panic selling we were after.   Considering what happened Monday in the world markets, a 500pts drop in the 'electronic' cyber world of trading is of no consequence as a very small percentage of us had a chance to participate.  Simply, what happened was a disappointment.   There was no panic selling as nobody had a chance to begin the selling.   Surely the trading desks had thousands of sell orders to input in the morning, instead what we got was panic short covering in our view at the open and and 30minutes later we were left with an incredibly boring trading day to deal with the rest of the way as the market ran through a sideways consolidation phase..  Nothing happened after and it felt like were back to the previous weeks shenanigans.    We do not believe the institutions were lined up to buy the first half hour as it's not the way they do things, so the only answer is the .75  got the shorts covering and the ones who were scared and ready to sell after seeing the turmoil in world markets didn't have to and sat on their hands.  This was the opposite of what we wanted and of all the 'possibilities' this was not one we imagined.  If the buyers had flowed into the market after the 820am and before 930am to ride the Fed news, the gap down of 460pts would not have occurred as only some of the electronic losses were pared...instead the gap down gave the shorts an excellent opp' to cover and they went for it and most likely reloaded again by late morning and into the afternoon.    What a gift.   Some will say the fact we ended -128/47/15 in the indices as a positive and the start of the 'progression' into making a bottom, unfortunately for us we don't see this as a tradeable bottom we were looking for.  Great the financials and retailers rallied in many an eye, but we know how fast these party poopers can rattle any good time.  So what we have now is more of the waiting game, we now have to start to look to the jobs report and the size of the next Fed cut to potentially get this market going one way or another.  To make matters worse, we have to put profit fears back on the table..high on the table as AAPL's after hours forecast squelched any possibility of a follow through and early morning extension of what they called a rebound yesterday.  If the market can somehow shake off the AAPL news by the close, we'll then know if yesterday was anything of a bottoming process beginning. This is farfetched, but anything can happen in this craziness and if the market show signs of this late in the day then we know the buyers are stepping up and then we should all probably too.   In the meantime, we remain conservative and if nothing of substance happens today, we'll hope there are some earnings surprises that will get through the cracks and give us something to trade till this mess takes us to the end of the month. 

Chasing the action...

Basically,  it all came down to the noon time puking of many growth oriented names, not necessarily momo stocks to mark what we think is a tradable bottom as of now.    Why is it a tradable bottom?   First, there were signs of panicking among some of the well known names intraday, actually quite the panic and they all came back strongly toward the end.   Actually, what we saw was scary enough that we did not not where it might end by the close the way it was going at lunch hour.   It could have gotten really ugly if not for a few news items related to the insurers that started to help the markets around 2pm (eg.charts of ABK MBI).   Second, during the worst level of the session, financials and retails, the two most battered group of last few months, had actually held their ground.   Surprise. When the financials stabilize, it provides ground for traders to look for upside action.    Still, we don't doubt the retailers will feel the traders pinch soon enough,   Sure, we may have not all entered long positions today, but we are not here to hit the exact the bottom, but 2pm + seemed to be the green light of sorts looking back.   We just wanted to see the bottom forming.  Pure and simple.   If it's real, we all have plenty of time to enter positions as we don't expect the recovery  to last an hour, a day.  We expect a ' true' bottom to give us more opportunity than this.    So, don't fret tonight , many of the stocks still finished in the red today (thats how bad it was) and are still way off 9ema as a measuring stick.   It was all of 2 hours so far in our books.    We want and expect more for what we've patiently waited for.   By the time Naz turned green, it just felt inevitable that we are at that point, the reversal point after a head fake or two by the Dow leading us on today.    Remember this to take with you into a what looked like a bummer trading day....."If the market can somehow shake off the AAPL news by the close, we'll then know if yesterday was anything of a bottoming process beginning.  This is farfetched, but anything can happen in this craziness and if the market show signs of this late in the day then we know the buyers are stepping up and then we should all probably too".       Not only did it it shake off the AAPL, but it shook off everything that came after 8am today that shook the market to another big gap down open.

Keep in mind, nothing has changed in the economic environment.    This is what we think was a tradable technical bounce, but it in a bear market even they can last a while.    Can this bounce turn into something really special?   We'll reserve that judgement at this point and will have an answer in a couple of weeks.     For now, we'd be looking at Dow 12700 and Naz 2450 as potential area of resistance.     It doesn't mean that we'd actually get to those levels but in case we do get a good rally going, that's where we'd be looking for some stiff resistance.

What to play and how to play?     First, whatever you want to play, don't commit full size and too many plays. We are only doing 1/3 of our usual size and leaving a hefty cash % in our account.    Secondly, do partial fills.     We are not going to long 1k of BIDU or GOOG or anything and hope for a 30 pt run-up.   We are trading plays in this bounce with multiple fills and small lots each fill, in order to protect from sudden change in sentiment as of now.    Again, this is not going to be an easy trading environment to take advantage of and everyone needs pay caution to make it as best as they can.    Now the plays...    We are sticking to those plays that have either released good earnings or those plays that aren't releasing earnings until at least next week.    We wouldn't want to be touching stuff that are releasing earnings tomorrow because earning risk just isn't necessary..ever.  We are also sticking to well established and well known liquid plays because that's where most of the hedge fund/institutions would be gunning for as well .    So, no cheapies and no illiquid ones.   We mentioned ISRG today as a play in a tight trading range that was actually near 9ema and may breakout.  That's hard to find these days.

Some key reports to look for tomorrow morning which may affect our play selection and strategy....   premarket POT(chemical/agri. group), WFR/SPWR(Solar market) can potentially lead us into these momo sec's for a trade , AH's we have MSFT(entire tech sector).    The key is that not trying to catch every single gainer out there.    As long as you catch a couple of good ones, this potential bounce will be that much worthwhile to you. 

Please remember to visit the site periodically to see if you are subscribed to email delivery pages.  Sometimes a maintenance upgrade bug overnight knocks some of them off.   Considering we've missed maybe one Journal entry in a Year and half, which we notified in advance, it would be prudent of you to sign in/ check in on site and check your "profile" and then " subscriptions"  if you did not receive your Journal by email before 830am est.  This should ring a bell to check if all is right with your account before the trading day starts.

Earning domination...

If Wednesdays move was a technical reversal, then today's follow up move is purely due to some new found earning momentum.    We had a number of technology stocks ( QCOM WDC FFIV TRMB...) gapping up because of their earning reports.   This in turn, helped many other technology stocks that have been battered recently to gain some good momentum.     The game has clearly turned since yesterday from sell on fear to buy on hope.   The hope for many stocks is that they'd release better than anticipated earning and give a rosy outlook for the year.

In the case of MSFT, we had a pretty good report including good guidance for the whole year.    This again is causing all sorts of technology oriented companies to move up in tendon in after hour.    Friday is likely going to be a good day and we'd be buyers on dips if they come.  Some of the usual Friday profit taking may creep into the equation following this quick trip up.    At this point, we can feel that many market participants are just "afraid" to chase up this market thinking that we are still doomed for recession and this market will eventually find its way down and break new low.  You can't blame'em.  That analysis may very well be true.   But first, we have to try and take advantage of this rally at hand.     We feel that we are at least safe up until the next Fed meeting(which is next week), if not the whole month.    Why?   Clearly, companies that have released good earning have been rewarded nicely and some beaten and forgotten stocks like RVBD ride the coattails.    This is the confidence traders look for and more speculation on potential good reports will put more money at work, it's that simple.    After this earning period, then we can focus on the actual economic side of things and prepare on a longer term strategy.   For now, this rally is most definitely becoming tradable.

We have to admit, markets action right now can make even the seasoned traders go crazy.    Even though we have to be aggressive and take advantage of things but the thought of carnage that happened merely 48 hours ago can curb your actual execution.     Basically, it isn't easy going from super cautious from the back of a deadly drop that last 2 weeks to super aggressive to trade this pop.    The transition isn't easy and you are not the only one feeling the pressure.  The bargain hunters and more long term value investors are the ones who will probably make the most out of these last few days in the long run.

Now some sectors and plays...we outlined the reports coming out Thursday to get a better picture into what may be tradeable...

Chemical/Agri.,   POT's earning is definitely helping the entire sector to pop up on good gains.     We really like this sector and even though some of these plays can be super volatile, we'd be inclined to buy on dips quite aggressively assuming this market isn't going back to yesterday's low any time soon.    Our favourites include MOS MON POT CF TNH.   In this kind of market, bigger is safer and easier to play.

Solars, this may be a tricky sector to gauge now as one report from SPWR was getting sold off while another report from WFR is getting bought in AH.    The only conclusion we have is that it is going to be more of an individual game for this round at this point.   As long as the good reports get bought up, we will not write off this sector.

Bottom line, even though we may enjoy a couple of good days ahead but it's still prudent to set stops and take potential profit as we move along.  Nobody likes to sit on cash during a long decline so now is the time to take advantage of this market.

DJIM #4 2008

What didn't we get last week?.  Let's just say almost everything possible happened and just get on with the week ahead.  There is only so much we can talk about the bottoming process, the panic, the emergency cut, the guy who just wouldn't hedge his bets and lost 7 bln for his bank while going long.   We had everything and anything and it all makes for great story telling in every media outlet and so we'll leave it to them to tell.     Simply ...all we were concerned about going into Mondays trading was how we left off the market on Friday.   While the market was losing steam and falling victim to profit taking and a 300-80 pt intraday decline off highs,  we noted late that despite of this action we were finding stability in some of our closely followed and therefore adding pieces of POT, MOS, ISRG, DLB for different reasons heading into the weekend.    It was not only a case of profit taking off a quick ride up, it was the fear of some financial institutions mascot or someone in the mail room coming with an ingenious way to blow up another 7bln or something over the weekend.   We looked at it in a different way and that was because the real mascot was giving a state of the union address and his flock of Wall Street homies would make sure he'd have a 'green day'  platform to stand on.   One that could also carry a green market into Tuesday if they really wanted to make a statement.   Unfortunately, a last look at the futures showed a -100 DJIA and the Asian markets sinking before hitting the sack.   Despite the Shang showing a 7% decline, Hang/Nikkei -4%, the futures were edging up into the open!.     Hhhmmmmm?.     Have we become so immune to these steep declines overseas and here?.  Definitely not,  but this is not just any week with a pep talk leading the way on Monday night!.    This week is full of it..literally as a full calendar of important economic data.. Dec Durable Orders tomorrow morning at 8:30, advanced Q4 GDP ...Wednesday morning at 8:30 and the Jan Unemployment report on Friday morning at 8:30 and of course FOMC meet and decision and the herd of earnings reports can all play a roll in flushing us back down.   As far as trading tactics, we're not changing anything at this point in relation to sizes and the number of stocks we are prepared to hold this week. 

Despite the market indices looking quite green today +173/23/23, we didn't get much participation from the fast NASD stocks we are concerned about such as AAPL RIMM BIDU etc.  We got a mixed bag today but with some nice trading ranges from those highlighted late Friday..POT, MOS, ISRG.

The solars were mixed today, but if the LDK potential deal noted today in alerts happens it could not only move LDK quickly, but itcould get the whole sec' moving.  These upgrades and daily calls on the solars are not to be chased as we said recently.   These stocks move on deals and if this 1bln plus happens it could be the right spark.

Another play we moved in some for a trade is ACOR...yep the same ACOR we were trading back in 2006.  The news is below, but what we are trading is the volume and the NCH( new closing high).  A combination as such should get us some upside for a trade here.   Well, at least it did in a normal trading environment..lol..    Just like reading a juicy EPS headline and climbing into what you think will be a move up, but instead ending up in a slide down as seen in many a stock today we've been familiar with, we have no real clue about how the market will decipher the below news as the day progresses.   This is why we prefer to trade the close and not worry about if we missed some points intraday.  As with LDK, we're looking to trade it, not love it.

 ...Co announces results from a thorough QT study of Fampridine-SR. This study evaluated the potential to cause an increase in the electrocardiographic QT interval. Fampridine-SR, at both therapeutic and supratherapeutic doses, was found to be no different than placebo. The U.S. Food and Drug Administration requires thorough QT studies for all new drugs seeking regulatory approval, as increases in the QT interval may signify an increased risk of developing malignant cardiac arrhythmias.

Tough decision ahead...

Mr. Bernanke and company won't be making an easy decision when they announce their policy tomorrow.    It is no secret that market participants have wanted a sizable rate cut.  Many times what the market wants, it gets from the FED.   What we don't know at this point is that if the expected rate cut comes, no matter the size, how is the market going to react?   What's also important, if not most important is the Fed's view on recent market turmoil and economic outlook.    Every word of the policy statement will be digested and analysed and we should know how people feel by 3:30 p.m.   

Instead of betting on the outcome of the reaction, we'd prefer not to take the risk and wait near the close to do some position shuffling.    As far as we are concerned, there's likely going to be three possible outcomes.    An extreme selloff, a powerful surge, or a flat line who cares kind of action leading into the crucial employment report later in the week.    Given the last couple of fed meetings and the skittish nature of this market right now, we think the first two possibilities are more likely.    We feel that a good approach might be to wait till late in the day and take the opposite action of an extreme reaction, good or bad.

After 2 boring days already on the NASD this week, tonight's YHOO report is not giving people any comfort when it comes to internet/technology sector.  However, YHOO has had a long history of disappointing reports because it's simply losing the battle to its competitors.  It`s a well known fact.   If we do get a surprise extreme reaction on the other two because of this report,  GOOG and BIDU tomorrow, we'd be keen to look for a long trade near the last week's low.     Keep in mind,  GOOG is also set to report Thursday AH, so any trade we do tomorrow on those two would be closed before the Google report.

Chemical/Agri. we still like this group but we feel the recent action may require some consolidation/pullback move in order to stablize the group.   Again, this is the group we'd be trading heavily if we get an extreme reaction from the Fed policy tomorrow.    One thing is for sure, this group has got the goodies (earning wise) and it's safer to add on pullback compare to many other groups.

Shippers, it does seem lately that this group has perked up from the lows and looks to be stabilizing.   We'd like to see if this group can weather anymore severe market downturn before getting ourselves involved on the long side. 

Bottom line, last week's low is still serving as a short term bottom and we'd be looking to fade the extreme moves until a clearer trading direction is established.    Next couple of days are likely going to be very volatile,  so we are looking to take advantage of some of the moves to flip in and out some of the fast movers. 

..put up or shut up

Simply...the FOMC,  by cutting its target Fed rate and Discount rate by another .50pts said put up or shut up to the market.  They've given everything including the most recent .75 cut for all the dry powder, cash that has been sitting on the sideline waiting for a reason to get back into this dismal market.   It also happens to be the FED can't put up much more. It has pretty well exhausted it's ability to do more as they have little left to cut.  Seems the only thing cuts do these days is let the market use it as a reason to sell the news.  Considering the markets got what  they wanted it sure put in a paltry effort to show it was thankful.  Yes...the timing of the Fitch credit rating downgrades rumors of the insurers was quite suspicious, but the least the market couldn't have shown was not to sell so fast and show some appreciation and say we accept your apology for being so behind the curve.  That was no way to show confidence or give confidence to all of us looking forward as the markets weakness to sell on all the old concerns is still prevalent and overshadows anything the FOMC will do.   The expectation of yesterdays decision was like a New Years countdown only to have one guest (the insurers) come in and ruin the party. The only cork for the short term that popped was our confidence.  It's crazy to think one can spoil a party that should last into the morning, or next trading day as is the case here....but that is exactly what happened.  This FOMC decision lead in was worse than all the pre Super Bowl hype. Now, we didn't expect a rally out of the .50 cut as supposedly it was priced in, but to tempt and tease and than to close so weak was not priced in either.  It just leaves a sour taste in many and gave the shorts the ammunition they wanted and were waiting for.  What this means and was probably a big reason for the letdown was technically the DOW hit a point of resistance by hitting the 12600+ level.   Simply, the shorts were waiting with gloves on to put in a punch and drive the market back down, of course the bulls use it too as an area to sell and just added to the potential burn.   We've said the recent rally is probably a way for the shorts to reload and you can't blame them when even the bulls think we need to test the recent lows before we can move forward.  Talk about showing your hand!. 

What now?.  Well...things are not any clearer, sure the cuts will help down the line but it does nothing for the short term thinking we need to have at this time.  There isn't much to add today as we need to see more in the days ahead.  This starts with what GOOG produces tonight, unfortunately after seeing all the reports out of internet / tech we can't be all too thrilled of the possibilities we may see and get.  We also have the employment numbers coming up.   Basically, you can't expect an anticipated cut to do magic by itself, but if you stick it in a blender with a positive report from GOOG, a positive employment report you might be able to mix and blend it together to get something going in the near future...but, that's a lot to ask of this market and economy isn't it?.  

A good thing is the next meeting is 6 weeks away for the FOMC and the addicts, which probably most have us become to cut decisions will have to turn our attention to other things and not rely on this so much.  Trading individual stocks these days to long side, even to a day long is almost impossible as any gains are short lived....forget about a lunch outing, hell forget a pit stop in the can as by the time you get back your green stock is in the red.  Something that might take a few hours to built is evaporated in seconds.

If you believe we are going to test the recent lows very soon because of yesterdays action, you should start shorting the market and the high beta stocks on the heels of the reversal. 

Crossroad...

We have to admit a 400+ reversal from a floodgate open was quite impressive today. We highlighted the importance of watching out for MBI bits and with it the potential for a " watch out upside" if the negative noise from yesterday could be broken down.  Minutes later and for 3-4 hrs they provided upbeat noise of their own, until with 5 minutes left in the day a newswire bit on the insurers plummeted the DOW some 100+ points in seconds showing either the markets sensitivity or just its craziness.  It's the markets resiliency to bad news (initial claims this am) that is making us think that maybe we have seen the worst.   Right now, Dow is near its resistance level and Naz is not that far off.    Does this mean we can bust through and start a parade?   Well, first there's this thing called Google to bowl over.     If it wasn't for Google's not so rosy report, we may have a chance to finish the week on a high note tomorrow given a half decent job report.     At this point, things don't look so clear.    Job report is of course going to be the focus of the day and it may very well set a strong tone in the early going.    One thing is for sure, a disappointing job report coupled with this GOOG report can and probably will crumble this latest rally.     As a matter of fact, there's no better time to turn this market around than now since it's right near its resistance level.

So how important is Google these days?   We think it's still an icon for growth oriented stocks and if it says things are slowing down, there's definitely cause for concern with regard to our economy.     If Google expects less advertising revenue, it simply means that ad. company are cutting back which means they believe consumers will be spending less.    Somehow, everything seems to be interconnected these days and you can use all kinds of assumption to justify the status of this economy.     The bottom line, aside from Google, there have been numerous earning reports so far this quarter that belong in the "disappointing" bin.    There is a general consensus that things are slowing down and we just have to deal with it.  Still, the reaction has been mute so far on the futures and we may see some of the AMZN type action spilling over as it too had a horrible AH's yesterday.  We also maybe be seeing a rotation into new leaders to take us out of the bottom and so there is less fascination or emphasis w/ GOOG and the rest of the giant growth stocks we are used to following.

Now the game plan!    If we get a good job report tomorrow, it is possible we get some very good action in the early going but we think it might be hard to sustain all day, especially on a Friday.    We'd definitely be looking to lock up some profit if such a scenario plays out.    If we get a bad job report tomorrow, we are likely going to wait to do some bottom fishing on some of our recent favourite longs.     In this market, it definitely pays to do the opposite of the market action when it's at an extreme level.    Look at today as a dismal claims number was quickly forgotten.  What we mean by that is to buy the good stocks on an extreme selloff and short the crappy stocks on an extreme rally.     Remember, this market is no longer a one way ride so you might as well start taking advantage of both sides of the action.

MA once again beat estimates and makes its way back here for more.  Remember, it's a circus.

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

Inevitable retreat...

Perhaps your watchlist still showed quite a few greens and it made you wonder if this market can continue last week's performance.     To us, when the major indices pause at the resistance, it's simply either standing on the side or start considering shorting the broken (crappy) names.    Either way, today is clearly not a day to enter or chase any new longs.   Sitting on your hands day as far as pulling the trigger on new trades.   We just continued to do what we did a lot of Friday and that is take positions off the table today in anticipation of further consolidation.

To be honest here, we aren't impressed by this particular earnings period thus far and winners have been far and few in between.    Obviously the chemical/agri. group has been the most consistent in terms of earning but we just can't say the same for others.   It's basically an exercise of finding oversold stocks that can come up with a not so bad report.    In addition, despite the fact many well known names have been beaten down going into the earning, they'd still get hammered after a lousy report.     This week we have the CSCO report to deal with.    Actually, we'd rather not look forward to its report because we still remember what happened after CSCO's last report  in early Nov.   http://www.djimstocks.com/journal/2007/11/8/cscothe-straw-that-broke-the-camels-back.html  

In any case, we are going to be very light on the long positions and only start dipping into names at levels that we are comfortable with. 

Right now, we are due for a pullback and that's the bottom line.    You might be attempted to buy on the first dip but we think it's wise to wait a couple of days and scale in on the purchase.     In the current market condition, there's absolutely no rush to buy anything  because it just doesn't look like this market is going to challenge highs any time soon.

Chemial/Agri.   This group (MOS POT TNH...) is of particular interest because most of them closed at or near the day high when Dow took a triple digit drop.   Had the market closed green or showed strength, we'd have no doubt to chase them.    However, even the best group can succumb to a pullback when the overall market is weak.     It would've been great if we can reenter some of these names at the level a week and half ago, but we think realistically the best entry point is probably just a tad over 50 ema.

Solars, we are actually surprised that some of the most popular names have held on to their gains today.   Again, other than day flipping, this group is still in the beaten down category and there's no need to get excited about them yet.  Coals, continued their move.  Another name we left out is JRCC in the under $20 group.

Bottom line, we might have just finished a bear rally here and the bias for many traders is still a downward market.   We have to be very disciplined here in choosing the plays and decide on an appropriate strategy.    So far what's been working is to buy the dips of strong(good) stocks on selloffs and short the weak(broken)stocks on upticks. 

..Bullchit' it was!

The ISM Non-Manufacturing index was unexpectedly released ahead of its scheduled time this morning, with the Institute of Supply Management citing a "possible breach of information" ahead of the release.....

Who breached?....this was to save the mkt from intraday (morning) panic as far as we were concerned!....well. .okay maybe we can start to understand if some guy spewed the number to those Mexican reporters after the Super Bowl after a few too many;).    Yeah, you know to the one(s) from TV-Aztec with the Tom Brady wedding proposal ....

A lesson on ISM,  if you've never paid attention to it or cared much for it, you will now ......Europe had a bloody one and it just followed up here with CNBC masking the importance of it all morning it seemed.     This is supposed to twitch 1 or 2 pts from  each report to the next... today it went epileptic, whichever way you read it...new or old way.

http://www.nasdaq.com/econoday/reports/US/EN/New_York/non_manufacturing_napm/year/2008/yearly/02/index.html.

As you know, we've turtled ....luckily ahead of all this as of Friday and we'll stay that way.   Hopefully, you are with us and have come to understand the importance of capital preservation, if not before..well then the past few days.    Trading is not only about being in the right plays,  it's about having having money left to get in the right plays in a better market.       This is capital traders might start to use,  if we start a bounce off the 50% retracement off last weeks highs at some point soon in some of the indices.   We'll see,  hopefully there is a catalyst that comes with it and not just more techincal mumbo jumbo to create a move.    1335 on SPX, if we remember right,  is one to watch.   Who'd thunk it!,  we'd almost be at 50% retracements in a few trading hours after the fast move up.       Sincerely...be quick if you want to play this way,  its only 50% more to the most recent lows.     That's not a whole lot is it?

Update on Wednesday, February 6, 2008 at 07:45AM by Demi/ YourPersonalTrader

Jus' a follow up to yesterdays note for those not familiar with TRIN readings.

We wouldn't be shy about selling anything you still want to rid of if this comes to fruition.

* besides ILMN closing well, we'd keep YTEC around for a potential buy after its post earning action yesterday, preferably on a dip

1000 pt up, 1000 pt down?..

Can this market pull this kind of extreme move in such a short time?   Yes it can and it's happening as we speak.   Well, at the end of last week, we finished a move that lasted a week and half and gained 1000 points on Dow.   At the beginning of this week, we have dropped about 600 points so far and it looks as though we are about to complete the round trip.     By all accounts, this is quiet scary.     It is interesting that this market rally failed at exactly the stiff resistance point noted Friday.    What's also interesting is that the coincidental bad news from the economic side and corporate earning side came just in time for the bears to help to cascade this slide.     Maybe this is the way it's meant to be.     Now we have to deal with the potential opportunities.

You might think that the easy thing to do is to throw your hands up in the air and give up on this market.   However, this is the kind of market that can be rewarding to a "two way" player.     What's working the last couple of weeks is to do the opposite of extreme reaction.    This time, it's no exception.   Our game plan for tomorrow is to watch for VIX carefully and if it challenges some extreme level coupled with the corresponding market action, we are going to be buying the dip.     This of course, is assuming we do get some kind of panic and extremely emotional action to the downside.   Notice the TRIN chart here and the comments about only 2 times the market finished in negative territory with a 2.00++ reading the day before, well today was a 3rd time and if its like the post reaction January 17th after the 2nd time...watch out!.    On the other hand, if this market does an orderly selling like on Tuesday, then we'd actually either stay on the sideline or pick some targets to go short.     One thing definitely seems to be in the cards and that is we are probably going to challenge the low that was set two weeks ago sooner or later.    To us, CSCO usually marks the end of the earning period in regards to sentiment and we are a month away from the next Fed meeting    Just ask yourself one simple question,  what have we got to look forward to the next three to four weeks now that the earning period is almost over.   Another rate cut intervention?.    Of course, we can always look forward to bad economic number that'd further confirm that we are in or heading into a recession.   

Bottom line here, we have to stay neutral and be downward biased during the next little while.     If you aren't comfortable shorting, then the only opportunity to go long is when this market gets extremely negative.    Otherwise, shorting on rally seems to be a stupidly efficient way to trade these days.

What to play?

As far as the long side goes, we'd be sticking to the recent eps winners that had strong positive reaction.    Plays like MA MOS POT .  are all good candidates to buy the dip when the market is in an extreme selling mode.    One thing we don't want to do in this environment is to chase breakouts and new highs.    This is the kind of environment where breakouts usually turn into a trap more often than not.      As far as the short side goes, anything that has had bad earning reaction would be worthy candiates again.    Oh yes, you know what they are.   Ok, everything from AAPL GRMN RIMM to GOOG are in that category.     Yes, you want to short the high P/E yesterday's growth names.   Trust us, when a recession comes, the last thing you want to go long is some high P/E growth names.

Tomorrow, besides the obvious CSCO reaction, we also have BG reporting before the market opens and CF reporting in after hour.   Both can have positive/negative effect on the entire chemical/agri sector so we'd keep our eyes closely on it.   The DBA Ag' ETFchart looks like it's quite extended, so potentially this sector might turn over. It's 50/50, long or short this bunch.

A meaningless day?

The very last thing you want to be thinking is that Thursdays action was a "major victory" because of the lack of follow through selling from the CSCO report.   Once again the market did not live up to many traders expectation by hanging on to its ground.  The day actually felt more like a brain cramp thing with CSCO hanging to low 20's more than anything else.   Investor Ma' and Pa' used to buy Disney shares for the certificates to give to the kids, today they were buying CSCO to put away maybe under a pillow it seemed.   Sure, we'd accept them, but they better be kept under lock and key after or we'd sell them.    We just can't hold anything that long for a payday!.   The market even tried an intraday rally which in our opinion was nothing but laughable.  It was weak and very much a head scratcher.   Not a head scratcher 'Wow'...more of a 'Huh?" . What the hell is this about?    Wednesday night following CSCO's eps, we were hoping for some dramatic downside movement today so we could trade against it.    Unfortunately, the oversold situation from the previous few days seems to have prevented this "panic" from setting in.    This is the very moment where you have to be extremely careful if you are considering going long in this market for a trade.   The bias is still very much to the downside and any intraday perkiness just cannot be viewed as a sign of reversal, especially if we do not test many of the lows.  That's what made today moves laughable and seemingly have no substance.   We are using Wednesdays high as a potential resistance point to enter new short positions if this market ever gets there.     This is around 12400 from the Dow and 1355 from SPX.    

Chemicals/Agri.,   despite the weakness from BG/TNH, MOS and POT held on to a little gain at the close.   They were both up in AH's thanks to a good report from CF.   But this is AH and this still may be the next group to get raided as we said sometime ago.   EPS won't matter much if the crows are circling now.    TNH, BG did nothing really wrong, yet did not perform as you'd expect from good reports.    If TNH reported last night, it would have probably been up nicely as well AH's.     Look ...if you can't trust the futures as Wednesday morning proved, why would you trust AH's sentiment on some individual stocks or a sector too much.     Especially at the market levels we're at now.     Even though this group held up well during the past few days, we are hesitant to chase this group into the upper territory.   There just seems to be enough resistance for this group that it's looking unlikely they'd challenge new highs any time soon.     We are keeping a close eye on this group and if there's any change in behaviour, we'd react promptly and alert everyone.

Right now, the kind of play that makes most sense is to short the markets enthusiasm when it comes.    Given Thursdays green close, there's the possibility this market will push for follow through in the morning and we are ready to fade the move.     It's just extremely doubtful that people would be happy going long into the weekend when the market just dropped about 600 points in the first 3 days of the week.    Instead, we'd be looking for clues in the afternoon to see if there's any sign of weakness and we'd go short some if market leans that way. 

DJIM #6 2008

Entering this week of trading, traders are seemingly in a conundrum due to the last two trading days.  After a couple of huge upturns and downturns, the market traded in a tight narrow range and no one really knows what swing will come next.   Of course, the market usually consolidates after big turns,  but since the market is near recent lows you have uncertainty come in.   Is it support finding its way above 12000 or is just a time out before that line in the sand falls?.     You have the Bears perplexed as more take on long trades and you have Bulls taking on some short bets.    At least this is what we are sensing, not only by the most recent action but by the general tone if you scope what is being said among traders on blogs etc.   It's definitely a puzzle and most are waiting for the next piece to drop to send this market either way.   Until that happens, we may get more of the same and that is consolidation action taking place early in the week.   Unfortunately, neither the Bulls nor the Bears knows what may be the next driver to make this market go their way.    The Bulls have used up their interest rate hikes, the Bears most of the economic bombshells like last weeks ISM.     What to do with the puzzle?.    One thing is certain and something to rely on is something you see, you may not always believe in it, but most are showing a reliance on charts now.    Everyone is watching support and resistance levels as a guide in a confusing market.     Actually...how can you not?, we all saw the importance of resistance during the Bear rally as the market hit a wall at 12800 Dow!.  In times of indecision it seems all have their eyes focused on TA and nothing is more simple than understanding resistance and support.     A wall is a wall and you don't need extensive TA training in getting with the program.     Simply, we want 12400 broken to have a potential retest of 12800 and not have 12000 broken on a downside close.     Considering this market can pull out a -250/50 day at a snap of a finger, we can see those levels toyed with at any point this week.   If you are turtled and away from the market, you should stay that way as a clearer picture may emerge to go either long or short very soon.  If you are dipping like us, it's best to hedge your bets and keep to small pieces.

Chemicals/Agri,  we discussed the need to contain ones after hour exuberance to $116 over CF earnings.   It wasn't much of a surprise to see the stock trade to as low as $105 during Fridays session.    What was somewhat surprising was to see MOS and MON make subtle gains and hold 9ema.   Due to CF's action our view did not change and we are biased to the downside for the reasons noted heading into Fridays trading.  POT' action was not fulfilling either.   We have AGU reporting this week and this could be the last short term blow for this sec'.

Coals, one place to stay long is seemingly in this group with this bunch of stocks making new highs last week. We've listed earlier the lot from the expensive to the cheapies.

We have some interesting reports this week stretching from FSLR to BIDU.   We all know the power these have on the rest of their sectors.  It will be a very exciting this week, up or down for momo traders.   So, let's wait and see what these reports provoke as far as trading possibilities go this week.

All geared up...

Basically, there's an equal consensus that we are setting up for either a big down move or a big up move.    The problem here is that nobody is willing to put lots of capital down to bet on either direction.     Not yet, at least!   The way this market has been trading, you realize it wont be a slow grind up or down.  Before the open, we said, "...we may get more of the same and that is consolidation action taking place early in the week." and that is exactly what we got as the major indices traded in a narrow range.

If we want a rally, we have to pay attention to the financials.   We have said often before that this market can not rally without the participation of financials and we saw that last time around.    As you can tell from today, if it wasn't for the financials, we'd probably be up by triple digits.    The ones who are currently on the sideline waiting would probably jump in as well if they see a better behaving financial group.     However, this subprime thing just doesn't seem to get old day in and day out.   For DJIM traders, it's the same.    Until we see financials move up as a group, we wouldn't want to chase anything aggressively.     For now, it's best for us to wait for something to happen before deciding to act.

Of course, if sitting in front of the market and doing nothing doesn't seem to be productive, so there's always the entertaining Solar plays and as well as the Chemical/Agri. group and the new group (coals) we intro'd in DJIM #5.    We are actually astonished by the behaviour of Chemical/Agri. as many of the popular names got some life today and could be setting up to challenge its old high soon.     Again, if this market is in a firm rally mode, we wouldn't hesitate to chase MOS POT MON in sizes but due to the lack of true direction of this market, we'd stay to trading small sizes. 

CMP, a potential fertilizer' play noted in Alerts section xmas time came out with excellent earnings AH's, unfortunately it had a nice pre run today already and so tomorrow may be more difficult to move.

Coals, again this group performed well led by ACI and JRCC in the cheapie category making or being at NCH's.  ARLP, NRP , CNX fared well as well.  MEE and FDG lagged today. One thing you notice about the group is all the stocks don't move in stride.  This could change if this sector becomes more of a momo group as the others did.

Solars had a very decent day today and you can either attribute it to the rise in oil price or the anticipation of a great FSLR eps report.   In either case, we'd only make intraday moves with the solar names because of their inconsistency day to day this earnings season.    The FSLR report carries pretty heavy weight on the overall sector and we surely remember what happened to many solar names when FSLR reported last time.

Bottom line, we want to stay light at this juncture and wait for more clues before jumping into a trading conclusion.    There's quite a few earning reports this week and a key retail sales number to be released mid week to possibly entertain us.

In Da Buff!

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

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

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

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

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

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