Bullish surprise...

We have to admit, even for a bull, Wednesday's rally was a bit overwhelming.      Many traders just aren't prepared for such a move given Tuesday's not so impressive finish and the constant giveth and taketh attitude of the market intraday.     It of course,  all started with a better than expected retail sales number that helped ignite the good sentiment.   On the contrary, many retail stocks actually closed relatively flat today.   It was pretty much a broad rally where even the beaten down techs like AAPL RIMM and GOOG all had a good close.    The one group that didn't participate is the Agri/Chem.   We have noticed that this bunch looked a little toppy recently, but we are still surprised that the extreme market bullishness did not help the chemicals/agri at all.   All in all, we hope we had you prepared for the possibilities leading into the day.  This included the idea FSLR would beat handily, the Ag's-Chem's possible reaction to AGU EPS and the dip on the Coals to take advantage of possibly.

As the Dow took out Tuesday's high..12400, traders just rushed in with more buying.    We are actually getting closer to the previous resistance of 12800 heading into options expiration.     One thing we have to give to this particular market environment is that every major move is done in such a relatively short time.    It literally goes its own way without traders preparing for a proper trading strategy.     Basically, we have to either chase up a bullish move or sell short on down tick in order to maximize a play.     Does it sound scary?   It actually is.     If you are feeling you've been under performing this market, either when it's going up or going down,  you are not the only one.   You almost have to guess the trend and get in before a move happens to take advantage.  This of course also relates to some sector plays as we saw yesterday, it is impossible to prosper as we'd all like because the stocks in the group are up 10% by 930am on light volume before you had your first cup of coffee.   As much as we are flexible in trading, we just can't simply put on both the bear and bull outfits at the same time on any stock, group or the whole market.      Right now, as we inch closer to the previous resistance in such a short time, the risk/reward to go long at this point isn't that favourable.    If we were to assault 12800 meaningfully and hope to take it out, we better consolidate the next little while before such an attempt.     We are eyeing 12400 now as a short term support and hope to see some consolidation back and forth for the next little while.    At the same time, we are keeping our eyes on any economic development and the situation with the financial sector.

Now some plays...

Solars, it started with FSLR and ends with it.    We are talking about this sector run here.   We recall that FSLR did the exact same thing with its last quarterly report and basically lit a fire across the entire group.   This time though, we think we all should exercise some caution because we have been getting mixed earning reports from some key solar players.    We'll take today as a good and solid solar day but we have to be smart to take profit in this environment when given the chance.

Coals, this group had some very good action and most of our recent mentions have done well.   We like this group because buying the weakness usually rewards.

Shippers, this group has also done some major upside move just the past few days and allows to flip in and out some during the day.   We do want to caution that the run up is pretty extended at this point and if it looks that way to you, it probably is getting close to a pullback.   We'd be inclined to buy on pullback though due to the recent interest in this group with the BDI climbing seemingly every day now.

Let's see if the market continues to shell out the luv on V-day!  This depends if Bernanke's testimony doesn't include "MISREMEMBERED" something as Roger Clemens testimony did;).  If it does this market will take a flogging like Ace did.

..Kiss of death

Okay..it wasn't that bad, but Batman And Robin testifying did enough to rehash slowdown concerns and consequently bring a big red day on Valentines day.  Red..how fitting!.  The duo did not rile up any new concerns, but after being up 4 of 5 last days on Nasd and 3 straight on DJIA/SPX, it was probably inevitable we have a pullback.    Unfortunately,  it doesn't look good when the only real gains came on Wednesday get grinded down almost in full the next day.    Simply... if you've got financials and tech leaning to the downside, your hands are tied and the outcome is predictable.     So...now heading into a 3 day weekend,  we are left with options expiration day to deal with and it's probable volatility and the usual Friday profit taking.  On the hand, maybe we got that out of the way yesterday and the Buls and Bears can just fight the 12400 and the SPX 1351 and let the market go into the weekend in some kind of peace.    Anyways...not to dwell on the big picture as it drives us all bonkers, lets deal with possible trading opp's for Friday considering our emphasis is on EPS trading and we have a few reports to potentially trade...

DRYS,  you gotta love a headline of a .47 beat, it sounds wonderful doesn't it!..One thing never to forget is to put this in balance. What we mean is this is a only a 10% beat and you have to consider what comes up on the CC as this co' doesn't  headline guide.   The company seems optimistic heading forward, but that we get from the report headlines and will let the market decipher early on if we want to play.  One thing we also need to watch is the BDI in the next few days because it has the tendency to go up 3-4 days straight days and then do same thing down.   Now it has been up 6 straight days and is up against the 200sma day.   Unless there is exuberance that you can swing a trade intraday today, we'd probably hold off holding these into the weekend.   One shipper that we have added to our watchlist is GNK after its report.  Many good things in its report and it is probably much better for those that want to avoid the volatility of the 3 main shippers we've traded here..DRYS, TBSI, EXM.

CMG, one of the big momo stocks of '07 became one the biggest short % stocks as well.  This provides a potential squeeze opp' at any time following the beating it took AH.  Look to maybe flip this today.   CLB followed by FTI could be potential early on trades with less volatility.

Amongst the beating yesterday what survived were the coal stocks.  Most strength was in the 2 big names we like FDG and MEE, which closed near high of days.    The cheapie covered here is JRCC and hit a high of 17.80 intraday high.  At this point with the markets the way they are we'd rather play the more liquid names with their institutional money.   A potential pisser today is some tier1 firm has downgraded the group.  If traders takes this seriously, we'd seriously look to add on the dip as earlier in the week

We've had a few nice EPS names going strong the last few days toying with highs.  CMP, ILMN, FLS.  The thing is this market wastes no time in taking away profits and it is very hard to even hold names like these through.  This is something we all deal with and should decide after DD if these plays are worth holding longer term, no matter the daily swings.    If you have the patience than you see this has been rewarding after introduction here.

DJIM #7 2008

It's just simply getting very technical out there.   Although headline news may dominate the movement of a particular trading day,  the overall movement of this market is becoming more range bound with the underlying downward bias still holding.    Things are tightening up on the technical side and we feel a move is coming sooner or later to break the latest range.   The more likely scenario recently has been a break to the downside and a test of last week's low just under 12100.   However, we may get some surprises judging from the futures trading at the current moment that coincides nicely with Fridays reversal led by financials after a BBY warning and weaker NY Empire number, Michigan sentiment.  Is the market starting to price in some of the bad Eco data?.  Well, we'll definitely know after this weeks data. http://www.nasdaq.com/econoday/calendar/US/EN/New_York/year/2008/month/02/day/18/daily/index.html

Quite a few earning reports and some economic news dominated the pace of trading last week.   Even in this recession fearing trading environment, we still have market participants speculating on earnings reports/guidance to the long side.  BIDU FSLR PCLN and even the CMG, we noted before the Friday open as a possible trade after the initial sell off.   This goes to show that speculation money is still out there.    This is definitely good news if your trading time horizon is no more than a couple of days at a time and you don't swing with huge bets.   After all, this market is only rewarding those with a quick trigger and a neutral mentality.

At DJIM, we are sticking with our recent theme of "long the good eps winner on weakness and short the crappy plays on strength".    Fading the strong market move in either direction until a major trendline gets broken should remain the theme.    Basically, this market has been trading between 12200 and 12700 over the last three and half weeks and we feel one of those level will get broken eventually.  The SPX is about mid point in a narrowing range for the last 17 trading days since Jan lows. 

For now, we are trading both sides of the market so we don't get completely left out when a strong move occurs in either direction .    What we aren't willing to do at this moment, is to commit large amount of capital to bet on any one direction.    If you want to minimize risk in this kind of environment, you just have to accept the fact that you have to churn to make a living at this point.

Chemical/Agri.  the reason we keep mentioning this group on a daily basis the last while is the fact this is one of the few sectors that is still trading near its 52 week high range.    With some names trading at a very decent P/E and a majority forecast of strong growth the next couple of years, we'd still be pounding on the long side of this group when opportunity presents itself.    You really don't have to trade every single name of the group, but to trade the ones that represent the sector best like POT MOS MON CF etc.

Solars, we'd remain very selective in this sector and pretty much stick to the saying "what's good for FSLR is only good for FSLR".    Trading a solar play that has a great outlook is less risky than trading those that don't.    If you are long those solar names that were being dumped on their earnings report, you'd likely suffer more pain once the sector pulls back meaningfully.  Citgroup upped a German solar to BUY giving a favourable outlook on the sector today.

Coals , just like we said the GS downgrade could play havoc and also produce more opp's to buy the dip.  Some like ACI, MEE took it on the chin, well actually it was a low blow. We all know most stocks in a particular sector, even if not included by name in a downgrade suffer. One that did not is FDG.  After trading it here now for a few weeks, we'd have to say there is more involved here, as in strategic possibilities.  We'd stick to FDG , MEE and JRCC for a more volatile cheaper play.

Shippers, the recent surge in DBI index, as well as earning anticipation have caused many popular names in the group to move a substantial amount off their recent lows.   After a couple of key name's reports late last week, we noted to be careful with the exuberance especially off DRYS big sounding beat.  We feel the run-up may need to consolidate for a while, especially after the fade witnessed.

ILMN, CMP continue to show strength. FSL is coming back to be picked up again.

If the Footsie(FTSE) can use todays strength which evolved from the banking stocks prospects later in the week and carry it over 6000 by the time we get started tomorrow, we could see a nice follow through on top of the futures we see now.  Qatar also said it has $15 bln it wants to put into Euro/US banks over the next year.  Some financials would not be a bad idea to trade. GS, MER etc. 

..cards on the table..

Before the open tomorrow, we'll have many of the cards turned over to indicate where we're going.  The way today went , you'd think the downward bias will continue as the Economic data consisting of the CPI, Housing starts, Retail Redbook is unveiled and digested.   It seems to be too easy, too convenient to assume today's reversal will continue tomorrow as all the charts from the SPX to IWN have a narrowing >>>>> triangle formation looking more like a downward break coinciding with the big Eco' data day.     The trading programs must be ready to go.   In either direction.   To sell the break or will it program buy if a threat comes on the lower channel of the symmetrical triangle?.   Considering this market is so unpredictable, who knows what tomorrow will hold.   Today, we probably had a trap and tomorrow it might be reciprocated.   Who knows!.     As for today, the QQQ's already broke down just after 2pm in fast and furious fashion, only to be pushed back to the lower line of the triangle following HPQ's EPS after hours.   We're not putting too much on the prospects of HPQ rubbing off on the other techs and resuscitating them all by it's lonesome.   Today's gap was erased quickly, the commodities driven market today soon faltered as this only brought on more inflation fears.   With oil kissing $100 those $600 stimuli checks might not last too long. 

Yesterday, we led the Journal off with the Chemical/Agr'si because they were trading near 52 wk highs.  A few got up to those peaks and actually held the gap up opens.   Considering how fast the move was today and with the potential of misery in the market tomorrow, this is the first place we'd look to go short in if you haven't yet during today's reversal.    Yep, you can't pick sides for too long in this environment.  

The Coals also exploded with FDG leading the charge to a multi year high of $50 and change.   We've noted the past few journals of buying the dip, including after GS's downgrade on Friday.    These guys can do some consolidating now as well.  The idea of buying a dip is not in the cards in respect to a potential overall market hit tomorrow.

VLNC had a nice volume day and hit the 50% mark since being alerted to 8 trading days ago.  Too bad the truck wasn't loaded with it, tomorrow would not seem so important... GNK up over 10%, CLB should be watchlisted for a sunny day,  if you haven't done so yet after last weeks note on them. 

A clear head for tomorrow is the only option....we'll update if necessary before the open

Triangle....

In case you have been visiting various T/A sites lately or have been paying attention to some of the CNBC commentators, you'd often hear the mention of "breaking out of triangle"!    What they are referring to is the exact same thing we have been talking for the last few days.  Basically, market participants, especially the ones heavily into T/A , are looking for a big move that would take us out of this trading range.  This infatuation has really been led by the Shorts to scare.   This trading range has basically been teasing us with some false moves left and right.     Today's no exception.    What started as a happy camper for bears kind of day only ended up as a "do I need to worry about my short position" at the end of the day.  The rush to cover positions would result in some fast and furious moves once these triangles get busted. 

This market has a particular way to mess with your minds lately.    What may seem like a logical outcome may actually turn out to be something else.   This is what we attempted to say in the Journal leading into today's action as everything pointed to a breakdown.   Today's CPI data was not good, and that's a fact.    The last thing we need at this moment is more inflation worry and that'll definitely hamper any recovery from a potential recession.    Also, the details of the last Fed. meeting was released today and we now have the actually acknowledgement of the Bernanke and company that growth rate will be slowed down this year.     So how are all these news not pushing this market down?    Don't ask why! .   It's just happening as we pointed out the possibility this weekend and that's all we need to know. "...However, we may get some surprises judging from the futures trading at the current moment that coincides nicely with Fridays reversal led by financials after a BBY warning and weaker NY Empire number, Michigan sentiment.  Is the market starting to price in some of the bad Eco data?.  Well, we'll definitely know after this weeks data. "       

Today action was some reinforcement.

Today, the bears seemed to have all the right cards and there was no reason not to think that things won't go their merry way.     However, as we all have known before, market has its own mind when it comes to timing of a break down.     In our opinion, in light of the recent economic news and a seasonal slower trading environment coming up, the market will eventually come down and at least test the recent low.     When will it happen?    We now have a feeling that we may be due for a big upward move before it gets rolled over.      We also have a feeling that many participants who are bearish on this market are actually scared that we'd have a big short term rally.       Then there's this triangle talk.    As the trading range is tightening up, the urgency to have a move has become far greater.    We feel the big move is going to happen very soon and this time around, you may not want to fade this move right away as the move can probably carry a few days worth of momentum at least.

The most efficient trading strategy during the past few weeks is to fade the move.   It means you go the opposite of a strong move and it takes a day or two before you get paid off handsomely.    If we are anticipating a big move that's likely to carry more than a few day's worth of momentum, you may not want to fade it as soon as possible.    Rather, you may simply want to trade with the move.     Of course, we aren't specifically calling for a direction here but merely pointing out the probability is much better now.

If we do start to get a move up, the most obvious sign we are looking for is from the XLF, or the financial sector to join in.     Financials led us to a 1000 point move from 11700 to 12780 and we feel it'll once again be the key to a potential rally.    If we get some nasty deteriorating action from the financials, then you'd know which direction this market is heading.

Commodities, believe it or not, the reason why this market isn't going down as many would suggest is the fact commodity groups are pulling it up.   We have everything from oil, coal, steel, gold, metals, fertilizers, food...and just about everything related to them having a lot of strength last couple of days.    Forget about AAPL RIMM BIDU, we have to expand our trading circle and know better about the MTL CLF(eps tomorrow) and even the PBR FDG POT MOS etc., we've traded before.     If global inflation is as real as analysts suggest, we better replace more of the plays on our watchlist.    Can this be a commodity year?    For many commodities, we are already into the unchartered territory so it's definitely plausible at this moment.

Now some plays....

Agri/Chem.,   love them or hate them!    You have to love them this week because they just don't seem to want to stop, regardless of this market's direction.   We hate them because it hasn't presented us with any good buying opportunity last few days.    POT MOS CF all notched new closing highs today. 

Steels/Iron Ore,  apparently the deal over the weekend was that some Asian companies agreed to iron ore price hike.   This explains a lot of upward movement from this sector.    We are liking many old yet familiar names in this sector including MTL CLF X GGB etc.

Solars,  again, the kind of eps/outlook reported by FSLR does not necessarily get shared by other solar companies.    We again witnessed a mighty miss from STP and it's having a pretty dramatic effect on other plays in the sector.    We were picking up some FSLR earlier today around $205 alert time and are comfortable swinging/ holding some for next couple of days.

Recent EPS winners, we are keeping our eyes on some of the companies that had strong reaction to their recent earning report.   We were buying pieces and/or eyeing FLS CLB JLL MA AXE ILMN CMP... for some good action provided this market breaks out to the upside.  Take the time to review this earnings seasons Journals to see if something is missing from your watchlist.  It's been a tough go this season, but most names here have performed well since being introduced and should continue too after surviving all this.

Bottom line, we aren't leaning too heavily in either direction just yet, but based on the way this market shakes off bad news lately, the momentum seems to be shifting toward up and not down.   It could be this week, if no news bomb comes across.... Just be ready

You go left, we go right....

Forget about follow throughs for the moment,  up or down, the minute anyone thinks that they have established a trend for the next couple of days, they are proven wrong for the time being.   Nothing drastic will happen until there is NEWS to coincide at the right technical moment.   Meaning, if after Wednesday close, we had good news in the morning, we'd have a chance for a break to the upside.   This will work vice -versa!.   Wednesday night, we were talking here the potential of a rally brewing based on the markets ability to shake off bad news.   Today, you can say that the market is not able to shake off the bad news ( Philly Fed.).   This isn't exactly the data that trumps the other data that the market has shaken off.   So, what's the deal?.   To put things in perspective, no matter how conceivable a short term rally materializing might be at any time, we are still in trouble as far as the economy goes.     This would give those who are staring hard at some of the violated "triangles..wedges" tonight something to always consider.   Excluding the commodity plays on our watchlist,  the playlist has just been crappy on the long side for more than a scalp for a point or two.   We did a few of those with the FLS, FDG, WFR today, but you need to go 500-1000's lots to make it worthwhile.   How many at this rough stage want to risk or can watch the market minute by minute to play a $25k-100k trade for a few grand profit on expensive stocks?.   We figure not many and we can't blame them.  A note, we just did a trial run of Briefing trader.  This service costs $300-350 a month and they are tossing in and out of trades for FSLR for a $1 gain.  Too funny!.   Let's calculate the risk and reward for this to be beneficial for a $200+ stock.   It's hard to get in on many of the new stocks thrown out here recently in this environment,  if you can't do nice size lots.   Still,  these have been around for some time at DJIM and almost all are positive from the initial note.  A medium term swing trader could have made a nice profit from them.   It's all about entry at this stage.    If you snooze, catching up days later is almost useless unless you flip a nice size lot.   Those that have patience are the ones being rewarded on stocks we've liked so far in '08 from DJIM.   Simply,  these are not the days you can buy 500-2000 shares of a $10-20 stock and make a few thousand easy and quickly.   This goes back to our recent words.  Those that thought this gig was easy are going back to their old gigs.  

So what now?   Long the commodities plays and short the rest?    Unconsciously, we have just been doing that it seems, but let's be realistic in these trading times if wanting to go long.  It is probably best to wait for a dip.    Hell, we'd rather go down with the ship-pers, the solars than the Plat', Pall'...basic materials if this was to happen soon than get stuck at the top with a group we haven't been in bed with for a while....        Anyways, why can't this market just generate any kind of rally?    We think the main reason is the lack of any true positive catalyst and plenty of worrisome economic news in the back of the minds of sidelined longs.   RIMM's sub #'s, CSCO's  upgrade try today,  just won't cut it.   It's hard to imagine what the positive catalyst could be in the near term, isn't it?    We probably wouldn't know the positive catalyst until a few days into a move the way its going.     So we have to think eventually, this market will give in to the bad news, especially if you think we are still at the beginning of the recession stage.    It's easier, don't you think?.     Given the recent renewed worry of inflation, things just aren't getting any better fast.    So at this point, are we desperate to seek a rally here?    The technical sign says we are due for a move in either direction and a 50/50 chance that could go either way.    That is if you exclude all of the potential bad news and if you simply look at that triangle.     We all fear that there's more potential for bad news down the pipeline compared to potential good news in the next while.    That is why we have been tilted toward a down move all along.     Sure, market likes to fool us with a move like Wednesday, but then it quickly pours some cold water in our face to get back into reality.   To be honest....This is Best!....so you don't make foolish trading mistakes tomorrow or the next day.

Our strategy right now is that we would take our time when it comes to chasing a rally, but will act quickly if we get a nasty downturn.     Stocks tend to move much slower when going up so by not committing huge and quickly on the first uptick, we'd likely not to get into a sticky situation if this market fakes out the move.   When the opposite happens, we better act quick if we want to take advantage of a market draw down.

Agri/Chem,  this is a first day in a while where we've seen some weakness in this sector.   We aren't going to go in right away and buy the first dip but we'd rather wait for an opportunity when the selling pressure eases.

Oil/Steel, it looks as though this group may need some pullback and we'd wait a bit before entry.

Honestly...this is not the time to go blindly in new sectors to make money!.   Get familiar with the move, the sector, stocks involved with some research.  Maybe this weekend.   Ask yourself is this worth getting in as was the Solars, the Shippers, the China stocks in '07?.  How long will this last?. 

Shippers, this is a group of particular interest to us.    Believe it or not, this was actually the best behaving group on our screen today and we couldn't help but wonder about the strength in this group.  Maybe, its the idea of shipping all those expensive Basic materials.   In any case, we'd probably want to be in this group if this market turns green.

Solars, note yesterdays note as for playing these now.  Besides FSLR, it is best to stick to the poly suppliers as plays.  WFR, LDK.  Btw. LDK has nice news here this morning it seems.  Still, we'd probably sell into it if exuberance is shown.

Bottom line, this isn't a market that's friendly to traders.    Sometimes without knowing which direction things would be, it means none of us have an edge to have a proper trading strategy other than to fade the move.    Right now,  we wait until we stop hearing about this triangle thing.   Symmetrical triangles show a ZERO bias for either outcome, a formation of perfect balance.   Yeah, a perfect balance to drive you nuts is more like it!.     A few of those triangles were somewhat violated to the downside, but still eventually held for the time being on little help as in volume.  That's good at least as it didn't take much effort.  The key here is the financials, you can't break without them to either side.  Yesterday, they were not that bad and so without news from them it is hard to breakdown substantially.   

So FWIW, unless there is bad news from their end in the morning, we probably reverse and half ass rally at some point in the day. 

Have a nice weekend!

DJIM #8 2008

...and the Oscar for 'Editing in a Rally' goes to.......CNBC and Charlie "Bull-father" Gasparino!.   We definitely have to put this in the comedy department, the only drama was for the Bears running to cover their steps.    As comical as this timing of the Friday rumor was, it only emphasized the craziness of this market and its dependence on news and the daily fear that is in the Bears.   This market can be turned on a dime, it just needed the right touch from those wanting to see this market hold on as long as it can.    It definitely didn't look good in the afternoon and had all the makings for a rough Monday.    Some say its in the charts and after almost two full days of a slow grind down, we noticed the IWM ( a measure we use during the day) had started to base and reminded us of the Friday before when the Financials led a charge up.   Is it..was it a coincidence the IWM based nicely before the CNBC 3:30 episode?.   Maybe, but if it is in the charts it definitely gave enough clues this time before the rally into the close.    Not everything ran, the techs and momentum stocks hardly participated.   The ones that did were GS for 6 points and MER for 3 as we had expected if a half ass rally of any kind ensued.   It had to be led by the financials as there is nothing else that could do it these days intraday.   These are usually the bets in our books, we prefer to sit out the MBI, ABK stuff.    So instead of a potential scary Monday, we had the futures up overnight with the world markets seeing green setting up for possibly a decent open in North America.  This comical event has the ability to turn into a drama,  if it does it would have to be some concrete news from the insurers and it could be enough to fuel a day or two of a rally.   Unfortunately, what we need to do is watch the plethora of data on the economy this week and therefore not get carried away in holding too many or too big of slices based any insurer noise.   Here's the potential goodies on the Bears :

http://www.nasdaq.com/econoday/calendar/US/EN/New_York/year/2008/month/02/day/25/daily/index.html

If by some remote chance we see anything of good news in the economy data, it will make the Bears scramble and we can have a rally based on something more reliable.  The subprime, insurer stuff will only give us a reprieve for a short time, the eco data is the crucial ingredient for a true reversal to start.

In the meantime, we need to be ready and know what to go after if a deal goes down!. We'd start with the financial stocks that work and only after some time would we go after the usual suspects in the momo world of the fast techs, shippers, solars etc.  We need confirmation of participation by these players this time around, we didn't get it Friday.   Stay cool this week, it should be quiet turbulent.

Remember..Futures lie these days and it works both ways.   A flat futures premarket may not tell the tale this morning.  Too many are thinking deal here and we may only start to see this it after the open intraday.

You have our respect, Mr. Market...

It just feels too easy that we would be starting a strong rally from such an auspicious beginning late Friday.    Sure, news flow has been pretty positive as of late with respect to the bond insurers.    But, they are only positive with respect to themselves really at this point, the bond insurers.    What we have today is definitely a divergence of force going a separate way.    On one hand, every single strong and good play we've talked about on the site for the past few weeks were doing some fancy upside moves, corresponding to the index action.   On the other hand, everything else just didn't seem to catch this 189+ point drift.  Poor AAPL RIMM BIDU, where's the momo in all of these?. Only FSLR continues to provide some fast trading action.

What's good about the unchanged rating of these bond insurers is good for some of the parties involved, namely the financials.  But they had other things weighing on them early and only started to move late after selling off Fridays upward move.   The financials are not done writing down more stuff.    In the morning,  Goldman Sachs noted that all of the major brokerage are in for a writedown of between 1 to 12 billion dollars this quarter with Citi leading the charge.   We definitely have heard this song before roughly three months ago.    Only difference between then and now is that we are in a much more difficult economic situation this time around.

Leadership in this markets rally is still very narrow.    Basically we are only concentrating on a handful of stocks and they are the same names you are probably sick of hearing by now.   Truth is, we'd like to start play some other names without having to chase those names that have become extended today.   New closing highs were always something we used to add pieces to as part of our trading methodology near the close on index action like today.  Now the market is such that you need to take the profits before they evaporate.   Unfortunately, nothing else is really coming up on our scans to turnover into.

Tomorrow, we have some key economic number to be released and they are PPI and Consumer Confidence index.    A disappointing number from those two would definitely cast a shadow over the recent rally and it wouldn't be a surprise if the market gets smacked down hard.   We've pointed out the importance of the Eco data this week and so we all should've been thinking of taking profits off by close to avoid some breakfast spillage.    Technically, you can say this market has broken out of the wedge and we are up from here.     But seriously, we just can't imagine many more positive catalysts down the road once this ABK fever wears off.     We have lightened up most of our long positions today and will be eyeing the economic reports to determine if it's worth to get back in for another round.

Plays that are working....

Agri.-Chemical,   trust us, even we are sick of seeing them POT MOS etc. going up and making new high every other day. lol   The truth is, the higher they go, the smaller the risk/reward and more cautious we get.     Ever since the group's break out on Feb. 12th, the group has not been tested to the downside.    It means that we have not seen any kind of meaningful pullback to warrant much more upside.     Sure, these names can move off a 190+ Dow day, but we all know that those days are still far and few between.     We are trading them still but with a much reduced exposure at this point.

Coal-Steels-Metals-Oil, you can't seem to have an up day without these commodity plays.    The ones on our watchlist FLS CLB FDG MEE and CLF HES are two more we've recently added... all had a good day.  Even our rock salt-potash play, CMP keeps making highs.

Biotechs like ILMN ZMH off here showed some strength as well.   Remember, we try to concentrate on earnings and most making NCH's today from DJIM were selected off their last reports/guidance this Q. 

Bottom line, although this market is rallying off ABK news, you still can't underestimate the power of a near 200 point rally.    Traders could use this as an excuse to chase stuff that was working well, regardless the relevancy.    Tomorrow will be a real test with the economic reports and if this market takes the reports well,  it's likely that this rally will continue a bit longer.

Anyways, today played out to script from our morning intro to the day.  The 'concrete' news came and it turned into a real drama for the shorts.  The financials were the beneficiary, GS and MER moved back up 6 and 3 points respectively and we didn't get the momo stocks participating.  Hopefully you didn't jump in as there was no confirmation of them wanting to play just like on Friday.  Basically, it came down to holding the stocks followed here for the past few weeks to carry the load.   And yes, the futures lied again as they set a negative/flat tone before the open.  They started to pick it up nicely in the morning before the news came rocking down.      Tomorrow is a mystery. 

..Closer than you think!

Amidst this fast rally, you almost can't help but fall asleep at the wheel in regards to watching the digits of the DJIA.  You notice the100pts here and there, the back and forth swings, but you don't really pay attention to where DJIA 12800 is in comparison to where the market stands intraday.    Simply, we've moved so fast the past 2 days and 30 minutes off Friday that our closeness to 12800 was actually a surprise of sorts.   We noted this weekend 12800 is what really mattered and that we should try to brush those 'triangles' off to the side.  This rally has swept not just brushed the triangles off in fast and furious action,  but now has all eyes squarely on the next resistance at 12800 and the potential long side trades it would hold if broken.    Now, 12800 is just the sexy psych number, in reality what we are looking at is to break through and close above the Feb 1 high of 12767.     That's where the 'closer than you think' comes in as we hit a high of 12743 today.  Truthfully, we hope there is a sane pullback off this extended action.   One reason is we wouldn't mind to get some of our DJIM plays back cheaper before the markets kick it up again.   We know they held up well in a rough environment,  let them show what they can do in a better environment.   Monday,  we were releasing many of those extended plays from here, today we saw more of the extended feeling spread to other stocks we monitor.     Notice all the the stocks here hitting NCH's yesterday did not participate at all today.    That shows us they were extended the day before as they did not play along in the rally today.    What is quite amazing is this fast move has not included the momentum NASD stocks we have always associated with a move here the past year...The RIMM'..AAPL's have struggled for this entire move!.  As well, the Finanicals have not participated beyond intraday swings on the monolines headlines...the GS, MER, BAC etc...the XLF.    Something has to give here amongst the XLF and QQQQ's and it would hardly be a surprise to see a group(s) wake up for a day or two and try to lead the charge thru 12800.   It has to be something big to do this and whatever it is, it  better bring volume with it.   The reason it has to be big is we've been stuck in this range all of 2008 (12000-12800).   A top of a range like this should not go down so easy.

It was an uneventful day despite a follow through of the rally as we had pretty well emptied our bench before the Eco Data.   Better safe than sorry.    Even though we had started guessing and noted here the Eco data might be being priced in after the Feb 15th trading action, we still can't be sure what side of the bed the markets will wake up on and in what mood. (Mr. Market is really Mrs. Market these days;).    Still, a few names off DJIM that did not hit recent highs on Monday played some Tuesday.  JLL, its big chart was updated by BT the night before showing its potential set up to a new highs since earnings, not a NCH like the others and JRCC, the cheap coal hit an intraday new high as well.  ROH is one we started to watch closely Tuesday based on chart.  We did add AKS today, a metal to trade as long as this sector keeps rolling.    The Agri-chemical, most notably the POT-MOS put in a two day H&S pattern and if we are to pullback in the market, we'd look to short to some of these for a flip.    Simply, the market showed this higher inflation data (PPI) is a laggard at this point.  We already know the state of things, the idea of recession.   This only seemed to surprise the shorts who can't understand why the market goes up on bad eco news.  We all get trapped into one way of thinking ..long or short and its a hard habit to break when the same things work over over for you.  You gotta be open minded and think outside the box.

Oh yeah...it's Shanghai surprise anniversary ..lets hope Bernanke doesn't give us one when he begins to testify at 10am.

Bury them bears....bury them bears!

You can hear the chant, but lets be realistic the market is poised for the pullback we spoke heading into Wednesday's action, now especially after 4 positive days.  A friendly, healthy pullback nothing too drastic is likely in the cards.       This market is currently doing everything it can to kill and bury them big bad bears.  Well, at least they think they baad!    Unless you're widespread short in the market, you wouldn't understand the kind of pain the Bears have endured just now.   You might not see stocks we're following flying to the moon,  but you need to understand this is a type of torture you don't understand unless you are ' short' the market.     Every economic report within the last few weeks point to a recessionary and inflationary scenario.     We have the Dollar at all time low against most currencies and oil flirting around $100 again.    Gold notches new highs on a daily basis and most of the commodity prices are notching new highs.      As an economist, this is very very dreadful picture.      So we assume this market should be sold down hard,right?....But, it isn't at all and the Bears are a tad confused!.  The charts "triangles' theory went belly up and they don't grasp the idea 'bad news' is being re-priced as of late.  Okay, let's try 12800 resistance...overbought talk etc.  Anything and everything is being thrown out now by the Bear side to explain the madness.

The theme of this market right now is to "crush the bear" in any way we can.    Sell offs aren't generating any kind of momentum and traders are willing to chase any upticks.   To put things in perspective here, the last few days we had commodities leading the market, Wednesday we had some notable gains from the financials and momo technology names.   Ah ha , what a concept that we addressed the day before as the needed ingredient if/when we go after 12800.    Now, let's see this work it's magic further in the days to come and we could be on our way.    This market just can't seem to catch a break going down.    Of course,the fuzzy bears would have you believe that 12800 level is untouchable and any higher level than now would just be an awesome price to short.    Indeed, if you aren't in any bear pain, you'd be happy to choose a point to short going forward.      However, for those who shorted during the grueling long wedge phase, especially the bottom breaks we covered just days ago,  they are likely in major pain and maybe thinking of covering under pressure.    We have said before that once the wedge is broken, we'd likely trade with the trend for a few days rather than fading the move.     It has proven to be exactly that and we are glad that we did not try to fade(counter trade the trend) the strength last few days.   Also, if you're not capitalizing right now, don't worry... it's not the important thing.  This is step 1 you might say.   The importance is what is setting in if we gain momo and then really go after Da' Bears.     You don't see our stellar '07 momo's running now..the Solars, the Shippers, the China plays and not even the fast Nasdaq techs and big financials...well, we did get the GS and BIDU to show strength Wednesday and give signs of what may lie ahead.      Be patient here, if this is worth our time it will be for the longer term.   So..where does DJIM stand now?   Despite the fact this market has been incredibly strong, we're finding it very difficult to find opportunistic entries when it comes to any good long trade.    With the leadership change today away from commodities, it's even more difficult to stick with "what's working" because what worked yesterday may just not work today or tomorrow.      As far as the overall market goes, we feel that there's still room left for upside and maybe in a semi climatic way very soon.    Other than picking up some fast day trading opportunities, we are mostly in cash since close Monday and waiting for events to unfold.  

Techs, it was interesting to see some of the techs AAPL(also ah) RIMM BIDU.. getting a bid today and as beaten down as they are, you couldn't help but wonder if they could get a couple of days of momentum at least.   Hope today was a start.

Financials, many brokers are wrapping up their quarter this week and are due to report in a couple of weeks.    We are seeing some strength in names like GS MS today without the usual insurer -monolines headlines.. and this sector is really the key for the duration of this rally.

Agri./Chem,  the sector looks a bit tired recently but most of the plays on our watchlist held their 9 ema today.    We'd definitely like to pick up some cheaper shares and we are willing to be patient with our entry. 

Bottom line, with techs and financials firming up today, we wouldn't want to write off this rally and expect it to crash anytime soon.   We all know and expect things to get worse before they get better,  but we also have to respect what this market is capable of.   

Spring Training...

Kinda felt like a lazy Spring Training game in Florida took itself to Wall Street today.  Nothing except da' boys playing catch today, back and forth till a half hearted swoon end of day.   Even the Bears couldn't be to thrilled by this triple digit loss on the lightest volume of the week, hey even in the middle innings today the Bulls almost turfed some green on them.   Must be pretty disappointing after fielding this line up card today....

Batting 1st:  A pullback was in the cards after 4 straight days made the market indices extended   2nd- GDP below consensus     3rd- Initial claims higher    4th- Benny talking of small bank failures  5th- Moody's headlines on regional banks  6th- Financials beaten all day(XLF -3.4%)    7th- Oil breaking out from its recent consolidation   7th -Commodities booming after a day off    8th-  US dollar at all time lows.  9th-, not sure what 9 was, but if you're going to rely on the 9th place hitter to hit one out of the park, you're in trouble!...You'd figure the Bulls had their doped up "Ace" on the mound to fend of this potent line up, but there really wasn't one!.     Don't tell us it was that Texas Ranger, George W. Bush claiming 'there will be no recession'..  talk about knuckle balls being thrown out by a knuckle head!

Anyways, it was a quiet premarket and as it turned out tossing out a few balls to hit before the open was the way to play out the game today.  So, instead of dwelling on today's overall market sentiment and what the last of the month might hold, we'll introduce or as re-introduce a few of the home runs today.

EOG, this O & G play just smelled of PBR that we traded here as soon as the news was released before their investor conference.   They announced 4 new plays with meaningful potential and also increased their Barnett gas play potential.   Poor Citigroup just downgraded it this week.    Basically, the Barnett play was this stocks growth at 5.0-7.2 tcfe's after today's increase.   To put it in perspective,  these 4 new plays carry mid potential of 8.5.   We don't need to know what tcfe's are all about, just that these finds are a greater # and the stock already traded over $100 based on mainly Barnett.  We're sure this will be around here as long as oil is gushing over $100. 

HURC,  guess most members that have been with us recall this play creeping in almost every Q after earnings the past few years.  After a few Q's off it reported a stellar Q today with what looked like record revenues and EPS.   Even though this was helped by way of dollar exchange, it still managed to hold its big gap and actually make another move late in the day.   It was a bit surprising as EPS stocks are just not running so far in this environment.   Having experienced this stock more than once, we'd wait for it to come back before considering further.

GTLS, (LNG) was a big play here last summer and its good to see it still is on radar of DJIM's bullpen. (sorry Mark..couldn't resist).  As we said this morning, it's not really about the EPS as the reason to chase, but possibly the combo of a decent report and the sector its in.   A CC is worth waiting for or at least trading into if you see a good reaction and then getting out as the call begins before evaluating if you should re-enter or just enter for the first time after the call.  Besides,  it is really hard to get a grip on earnings this Q and what will react in a positive manner.  You could see a blowout headline a la DECK this evening, yet by missing a detail in the actual report you could be in big trouble chasing at the crack of the bat.   It's really a crap shoot with earnings, a lot of things need to come together to get a reaction like HURC's/ GTLS today.   Just like HURC, lets keep them around and watch for them to come off these extended 1st day reactions.  We're not in a market where you want to hold on too long yet.    So, if you made it into these plays today,  it is best to pocket gains and be glad you had it on watch before most.    If they are really this good, we'll get around to them again.

Friday might come down to whoever has the biggest paint brush to close off the monthly on the charts.  As of yesterdays close (27th), the DJIA was up 1.7%,  SPX up 1.3% and the NASD was down -0.2% for the month.  After today, it looks more of a wash of a month.  Amazing, all things considered we've had to put up with.

DJIM #9 2008

One thing is for sure, you have to have a real passion for trading just to sit through this market, let alone trading it.    Currently, we are facing one of the most challenging market environment in recent years.    Last week, an Ambac led rally turned really sour toward the end of the week.   By the end of the week, all eyes are focusing on the economy, the inflation, and potentially more billions of writedown from the financial sector.  The potent line up of bad stuff the market was able to fend off Thursday caught up to it on Friday.

Fundamentally, everything seems to be pointing downward for this market.   We have an inflation driven rally in oil, gold, and base metal.    Raw material prices are creeping higher and it looks as though the inflation is spreading globally these days.    The economic reports from the most recent week is not helping this market either and there's further confirmation that our economy is not only slowing down, but it may tip into the "R" mode.    Mr. Bernanke also further addressed the status of our economy and played his usual "why we have to cut the rate" approach.   Then, there's the U.S. dollar.    A lot of the inflationary pressure is tied to the strength, or rather weakness in this case, of the most popular currency, the dollar!

Technically, this market is still within that 800 point range from the middle of January.    So far, we made two attempt to break out of 12800 on Dow and 1395 on SPX and both attempt were failed miserably.    On the other hand, the attempt to test the January low has been rather none existent as we never even closed below 12100 on Dow and 1320 on SPX.     Put it this way, bulls are frustrated and bears are even more frustrated.   

For DJIM, we share the same frustration as the rest of the trading community and we'd also like to see some break out movement from this market.    As we inch closer to the support, we'd get more cautious on the short side and look for opportunity on the long side.    The groups that we are most comfortable buying is essentially the inflation group.    Our watchlist has been filled with oil, steel, agri group.   

In the coming week, we still have quite a few reports due from some of the small and mid caps and we'll keep our eyes on any potential movers.  Also, we have an important job report in the coming week which will shed some more light on this economy.

..staring into the Abyss

The market pit abyss was right before our eyes today, one we have accepted to happen just to get all the talk of testing the bottoms of January out of the way.   It's March damn it and if we don't get over it soon, we just prolong the inevitable move up sometime this year from happening.   A real move, not just one to test 12800 all over again and then get pushed back down.   The backdrop was perfect today as the fast moving techs, RIMM, AAPL were getting crushed and the one symbol we watch most for direction, the small cap ETF IWM broke down hard with volume in tow around 2:15pm.   We had all the makings of a terrible day tomorrow,  if the DIA, SPY, QQQQ's just followed IWM into the door of the abyss!.     If we had the bad close as we noted today, those DIA, SPY's, QQQQ's would have followed without a doubt later in the day and screwed up many a support lines on the charts heading into tomorrows trade.    Instead of following IWM's lead, the DIA/SPY held on and about 3pm began to reverse and we ended slightly down on the DJIA(-7 ) and painted some green on the SPX.    We may have to accept that this was the beginning of a bounce,  but if we've gone this far the last 3 and a half days...let's just get it over with and test the pit .    We know this won't be a bottomless pit as there are tons waiting to buy this market when it happens.   So as the Nike 'swoosh'  said it.....Just do it!..!    If we do get an upward bias tomorrow it will be because the odds just favor it,  not because this move today was of any true substance.   If we don't move up Tuesday, we can blame it on the things we didn't like today as potential precursors.    Firstly, we watch the IWM as its a more honest reading of those trading intraday and its a better barometer for the kinds of stocks we trade and we simply didn't like it, today.   Secondly, the destruction in fast movers we trade on the NASD..RIMM, AAPL, GOOG were being trashed and with the Financials offering no reason to think they are ready to reverse....we are left with the question, who is capable of leading any move up now?.     After hours the QQQQ's are simply at the open price on January 23rd.   A little spooky.      Also, considering all the huge intradays moves we've seen in past months,  reversing around +100 on DJIA and 20 on NASD and having the majority of our DJIM watch listed be limp during the last hour didn't generate much buying excitement from us.  Actually..none at all.   The question here and now, is do the Bulls just let support crumble or do they make another half ass attempt for a rally??.   We actually don't think that too many shorts got positioned on this last leg up and then were taken by surprise at velocity of the drop since mid day Wednesday to set themselves up.   It makes us wonder how much short covering there would be to fuel a move of any substance and duration at this point for the Bulls.  Doubtful any rally would run anywhere close to 12800 this time before turning back to where we are now.  Basically an early March break before we test the January pit.   Anyways, so much could happen tomorrow that it almost seems right nothing will happen.    There is really nothing on the horizon tomorrow (no eco' data)  that could fuel a move either way other than the technical stuff.     Maybe the real set up on the horizon, one that will decide the markets direction Tuesday is a News Headline. 

Gasparino'd..

From the late day action this week, you'd swear that we are making a short term bottom here.    Yes, it seemed that the sellers just did not have enough juice to push this market into a true panic mode on Tuesday.  The Bears were gased out by another Gasparino rally even though it seemed 12032 was already set as the low of the day as the news broke.  12032 might be the new 12000 till Friday if the ISM number does not make the market loopy once again in the meantime.   The bounce was swell and all, but you can tell the apprehension of the market to chase many stocks on our trade watch.  One reason was the ISM/ jobs numbers looming, another was the ABK deal might not happen soon enough again and another was the meltdown in commodity stocks during the day.   If you ask most of the professional traders, they'd all agree that it's probably best for this market to test the January low.    Why is that important?   Well, for one thing, many of us are now programmed to think that we'd test that January low sooner or later.    What this mentality does is that any attempt in rally will be sold hard or shorted heavily sooner than later.    This particular strategy has been proven right in the past month and half.    If you ask, is it still possible to rally back up without ever testing the Jan. low?   Sure, it is possible but facing so many economic woes in this environment, the probability of a major rally isn't good.  Even though 12000 should play a psychological barrier any terrible news headline will melt it away.    Folks, there's one thing we have to keep in mind here, as far as the economic side of things go, it looks like it will get worse before it gets better.  Never forget and load up heavily.   The situation within the financials sector making new lows Tuesday is even harder to gauge because right now we just don't have a sound economy to speed up the recovery.   We shouldn't even be talking about any recovery so soon and just deal with the cards being dealt day to day.

Tuesdays early carnage wasn't just limited to the financial sector.    We had most commodity plays down substantially because of the obvious melt up recently.   We weren't and aren't in a hurry to start buying it because we fear the potential downside of this market in the short term can cause a lot of collateral damage in the other "strong" sectors.   The environment right now is no longer about buying the names with the best growth or earning power.    We have to solely focus on the kind of plays that'll behave the best in a recessionary and inflationary environment.    If you think some of the techs looked attractive Tuesday and seemingly getting a bid, don't get sucked into thinking a major rally is ahead from those companies.    We'd be very picky in choosing any long plays at this moment.

Excluding the ISM #, the week is actually quiet in terms of economic news until this Friday's crucial job report.    Until then, we still have two trading days to deal with before the real trading motion sets in.    Just remember, this market rewards those who fade the extreme move.   It means that you have to be very patient to wait for an opportunity like that.    Also, it's very handy to have both a long play list and short play list in front of you so when the opportunity arrives, you'd be quick to act on it.     One last thing we find to be extremely crucial is that we trade small just in case we are wrong on the initial move.  

So..just like we noted Mondays late move didn't provoke buying in from us, neither did Tuesdays.

Halt rally...

Quite fitting we had a Halt Rally to +150 on the DJIA considering we've speculated on Half Ass Rallies more than once the past few weeks off the ABK/MBI turmoil. The last 48 hours played out as we noted intraday with the shorts covering into the last hour on Tuesday to avoid being caught in the news of a ABK rescue and then the quick tick up as soon as ABK was halted followed by the sell off of about 200 points as reality set in.  A 1-2-3 shuffle that is no different than what we see in the markets on individual stocks as they move into an earnings report and then sell off.  Trading is a game of human nature and it is prudent to have some street smarts and try to think how the herd will react in order to be on the frontline and not be followers.   The difference comes in the form of dollars and that is why we are here, to make money and not lose it.   Not to be beat a dead horse without a white knight to bail it out, we are left thinking ahead and wonder what promise lies ahead for the market to move forward now that half ass rallies will stop on the monolines soap opera.   Now the Bulls are left wondering what bailout will come for them without these rallies to save the downticks into the pit!.   The tide has probably turned and if there is news on the monolines it will probably be negative, so we have to be prepared. 

Underlying all the ABK hype was what matters and that was the action in commodities and the stocks involved.   The melt up action rejuvenated overnight after a substantial down day as new highs were made all over the place.    Based on this action and on the decent last 10 minute close, we'd be looking to see which commod' will make the best trade of the day very early.  We wouldn't be afraid to jump in early today unless we get some bad headline in the pre market.   The market may will feel a sigh of relief today and just go after what is working in the commodities, in case it does we'd play the below.  

If its coals, we'd look early to FDG as it did not wilt under a downgrade, AKS, JRCC follow.

If its O & G's, we have BZP, EOG, CLHB and FLS potential 9ema'er rebounder.

If its Agri-chemicals, we'd add early to CMP as it made it back to NCH levels and then deal with usual suspects..POT, MOS

If its metals, we have to look at MTL and CLF

If its none of these, we'd stay away heading into Fridays jobs report and read the Ambac prospectus to kill time...okay maybe not.