...are we there yet, dad?

Honestly..the best lead we could give into tomorrows performance is to get a good nights sleep, brew a big chug of coffee by 830 am and just in case position a mickey of Jack D', Jose or whatever is your fave beverage in your desk drawer for later.     It's gonna be a helluva ride and most likely not just one way intraday and nothing less than triple digits.  We expect violent swings and actually would be disappointed if they do not come.   To predict what may happen would be insane, the possibilities are endless tonight.   The anticipation just got louder today as the Jobs report has collided with the SPX breaking to 1304.  Its amazing how often the ducks line up in the most opportune time.   Well today's flavor of day in TA' was this SPX close, tomorrow it might be 12000 and yesterday it was the wedgies.    It changes everyday as to what is important and is quite tiresome and gets confusing to the casual trader.   If we stick to the most simplistic, its the 12000 to 12800 range we've been keeping here to. 

Coming into the trading day, we said in part ..." Now the Bulls are left wondering what bailout will come for them without these rallies to save the downticks into the pit!."  What we were alluding to is that as more subprime fallout occurs and because the monoline fiasco gets pushed to the side now, where would a rally originate from to help the financials and therefore the market.   Little did we know they would drop so many bricks at once this premarket.   We had foreclosures, disclosures, delinquencies, failed margin calls, distressed selling at UBS, MER amending..blah blah.   They should've just gapped the market to closing levels instead of grinding.   But that's too easy, its the grinding the takes traders money away as itchy fingers make you jump in and then slowly rot you away with another leg down and then another and so on.   Anyways, the point was there is no saving the Gasparino way now.

Despite the day unfolding this way from the open, we had some nice moves from the mornings watch.  Unfortunately, this market continues to be made for ones with big bladders that can capitalize quick the gains in a CMP, BPZ, which got erased fast or the very patient nerves of steel ones who could have stuck with the CMP, FDG, JRCC calls here from its first days.    We also started to like the action in POT/MOS today once again.    So, not a wasted day and we'd stick to names highlighted this morning in case an opportunity to fade a move comes tomorrow or otherwise.  

Will we get there?.   Town of Capitulation?.   The truth is we'll probably not know till we've driven through it and then look back, we'd just settle for a gap down tomorrow and take it from there...or a surprise induced moon shot to just relieve the tension for now ....Good luck and we'll keep in touch during the day...

DJIM #10 2008

We are 10 trading weeks into 2008 and major indices closed at a new low for the year on Friday.  By now, we think most if not all the market participants have either willingly or unwillingly admited that we are in a bear market.    If this was just a correction, the market would've turned already.   Instead, for the better part of the last 8 weeks of trading, and on more than a few occasions, this market tried to defy logic and rally on hopes that all of the bad news was already "cooked" into the security prices.    

Until last week, the proven trading strategy was to fade the strong selloff and buy on the weakness on the notion that we won't break 12000 on Dow and 1320 on SPX.        Based on the volume the past few days, we believe the latest breakdown of major support is pointing to more downside ahead of us.   A fresh phase.  Why?  The selling volume of the past few days that broke the major support does not seem climatic and the pace of selling seems too orderly.    Of course, just by having a technical picture in front of us does not give us any real edge to interpret what may actually happen the next few weeks.

Without looking at any charts of any kind, but by simply reading through some of the major headlines the past week, you'd wonder why we even bother checking the charts for confirmation.     Lets just recap some of the news headlines here.    

• 1. The much anticipated bank bailout of ABK finally came to conclusion with ABK ending up doing an equity offering.     This news shouldn't come as a surprise because most of the banks desperately needed to boost up capital on their own balance sheet and why would they offer free credit to a very troubled bond insurer?    You can see the reaction of most financial institutions as most of them closed at multi year low.   Things will get even more interesting as GS and LEH are set to report their Q EPS a week and half from now.    2. Both Crude and Gold hit new highs during the week and they show no sign of pulling back.    This of course coincides with the new low hit by U.S. dollar on anticipation of another major fed rate cut.    For those who don't quite grasp the connection of these things, you only have to understand that more and more money is fleeing U.S. dollar denominated assets and into anti-inflation assets such as gold and oil.   If you have been playing any stocks that are into digging stuff out of the ground, then you'd know which sectors people are favouring right now.   3. The latest job report indicated a loss of 63000 jobs.    This further indicates that we are heading deeper into the recession and it doesn't take a genius to construct a line chart from last three job reports to see where this trend is going.

So what now, you ask?    Has this market become an all out short fest?    Historically, March to September is never the strong period for the equity markets and it's more importantly so this year to consider.     Basically, we have an economy pointing to deeper recession, a credit market that is in disarray, and potentially a stagflation environment, we just don't have a lot of positive things to look forward to.    Fortunately, we think what has worked for us the last few weeks still apply to periods going forward.    That is, we'd try to play on the long side of resource based sectors on dips while short others on strength.

We have a Fed meeting a week and half away and if there's a rally anticipating a rate cut, we'll be there.   To us, things will go from bad to worse in the coming months and we'll keep this mentality in our trading strategy.    In the meantime, it's a good idea to define your watchlist into a long play and short play list so you'd know what to do when when a triple digit move happens from this market.

A few things from Friday needing some explaining was the lack of correlation in the indice tallies.  We don't have it.   The indices not blowing past the breaking points on horrible news maybe offering up a chance to move up early in the week.    Was this what the NDX stuff was thinking ?   Something is amiss here and we're not sure what to make of it.    We'll just eye it closely starting from what may be a very telling premarket futures. 

..burns money twice as fast...

We had everything answered today that we couldn't answer at the end of our last Journal.   Where was the correlation between the indices closes from Friday?.     Despite, the DJIA/ SPZ taking the brunt of losses after the jobs report, the NDX, the RUT finished with very little loss.  It hardly made sense considering the terrible news and being in such a vulnerable technical place in regards to a potential breakdown.  Something was amiss and today was the missing link from Friday as the NASD-NDX and RUT played catch up in a big way.   The big losers -1.95 -2.0 -2.45%, respectively amongst the indices.   In the past, we have discussed the probability of 'momo dominos' and today anything that resembles momentum plays from the past months burned twice as fast anything out there.

Considering the trading stance we've taken here of late,  this is one time where the hurt should have been minimal, if at all.   Instead of being creamed with the lot,  we are now looking at the possibility of a bounce where we could trade these in tow as we sit around SPX 1270.   Tuesday looks conveniently set up to trade some of these beaten ups.   While the market grinds down ..DJIA down 7 of 8 days,  RUT/NASD/NDX closing below intraday lows from Jan swoon, our trading stance which first is capital preservation should allow to capitalize on any reversal, short or longer term and in the meantime avoid losses like those seen today in this overall rough trading environment.

If something fresh doesn't sour the market more, a bounce of some sorts should be coming tomorrow as we are at some important ( yep..again.) FIB technical levels on the SPX.   We might even look at some of the firms like BSC, LEH for a trade.

Fed's Rally...

It's getting to the point that you can almost count on the Fed to come out with something to propel this market on a monthly basis.    The fact that this market is up 400+, the most point gain in about 5 years, suggest that market participants really liked the Fed announcements today.    The only beef people may have today is that "why wouldn't Fed foresee the problem we are having now months ago?"    Well, the truth is, it isn't a problem to Fed until it's really problematic.    In case you didn't understand what the Fed did today, it's basically trying to "save" our capital market.      Whether Fed's policy will succeed or not, we won't be able to tell for months down the road.      For now, this "temporary fix" seems to have many market participant's mojo going.  We now need to see money come off the sidelines.   The fact this move was 'unprecedented' and involved other countries getting into the act made it seem different and possibly give it some legs today without the usual sell off.   We said a bounce was conveniently set up for today, this FED just made it more so and we went after pieces of many stocks as we discussed. 

Yes, prior to today, we were down 7 out of 8 trading days and we just broke through major support coming into today.     Today's action effectively erased the fear that we were way oversold the last little while.    When you have these many points gain, you can see and tell how market participants are emotional and excited to see a good ole green day.    The question now, does today's move signify that a major rally is under way?  Did we double bottom?   On the technical side tonight, we are right back toward the previous support of around 12100 Dow and 1320 SPX, which now act as resistance.   We'd also look to IWM 67.40's as a hurdle for those watching the intraday ticks, we noted this level in alerts to watch last week for direction.   When that level cracked, it has been down all the way till today.     For a monumental move like we had today, you'd be sure that there'd be consolidation in the coming days.   This market has become very technical lately and without sustained positive news development, we believe it's very difficult to move up in a meaningful way.   Sure, we aren't taking today's move lightly,  so we'll try to stay neutral the next couple of days until we see where the next move leads us.   We still have a Fed meeting coming up next week.   Based on the reaction today, we don't think next week's meeting has that much more significance as the rate cut has been fully been priced in for a while.    What we want to see, however, is Fed's attitude toward the recent economic data which points to a recessionary environment that also tags on inflation.    So far, Fed has been mainly taking action to help out the financial sector which is the most important agenda in this market right now in our opinion.  

• One real concern is the BSC situation that must be resolved.  Good or bad to move on.  The financials, the market were acting too wildly on this stocks back today.

As far as stock action goes, this market can go from extremely oversold condition to overbought on one days move.   This is why we alerted we are backing out late in the day.   If we miss a gap up tomorrow, that's fine,  as we expect any immediate follow through to encounter resistance noted above.    Right now, we aren't going to chase any solars, shippers or technology stocks past today.   If anything, we'd be inclined to start to short some from those sectors in the coming days.    On the long side, we'll wait for agri/chem to stabilize before we re-enter after today's trade and we are sticking with some Oils & G ( BZP hit $21 ) and steel ( STLD guides higher in ah) stocks before the solars/ships/techs.     This market definitely gives headaches to those who lean heavily to one side for too long.   It's essential to have both sides covered in order to minimize the risk that the market runs the opposite direction of your plays.

Spitzed out....

Hopefully in weeks or maybe even days to come, this quick rally to 12300 won't be known as the 'Spitzer rally' that failed as bad as the man himself.  It seems as Wall Street was only sending Spitzer out with a celebratory rally, a bon voyage of sorts for the man so dear to their hearts.  As soon as the resignation came, the rally not only halted but by late afternoon sputtered quiet badly in our view.   A disappointment. All any Bull would have wanted to see would be a marginally green day and just call the days action the beginning of a needed and expected consolidation after a fast and furious run.    Unfortunately, a look at the day tallies on the indices and you see a drop of nearly 200 pts off the high and at days low.   As we noted, we would not worry about missing a gap up in the morning and preferred to be clean of positions heading into the day.  Well, we didn't even get the gap, but instead just a tradeable 1 hr rally to flip a few things in and out and then get back to waiting on the sideline.   Basically, the day was a write-off and a day to catch your breath and maybe to re-evaluate your heightened enthusiasm for this rally being different than the others in the past few months.   We really didn't have much to say before Thursday's open as we sit in cash,  but turning on the tele this morning and seeing the ticker on Bloomberg flooded with red,  we are fine with our decision.   It good have been better, if we had shorted the market by close, but we don't exactly want to wake up to another surprise to drive a short covering and be caught with our pants down like Spitzer.  The futures are off nearly 1.5% across the board this morning and it is really of no consequence to us why it is.   We'll check soon enough, but it hardly makes a difference.    We all can't be surprised by anything these days and so we'll just go with the flow.  One thing that is not a surprise today is with every injection by the FED, new or old, the euphoria in the market dissipates faster and faster.  This is looking like another squandered opportunity to get anything going to the upside.   Considering the economic numbers due on Friday, we'd just relax till the numbers paint a picture.  If you aren't into shorting intraday, don't be hooked into the market, your weekend may have started with Spitzer taking the podium yesterday. 

Shifting Focus...

In a way, this market is getting extremely difficult to lean heavy in one direction at any point.    Even if you are a super bear, and with every economic indicator going your way, you still want to arm yourself with enough hedge to deal with a day like today.     This market started off just as everyone suspected but the turn of events in the afternoon astonishes even the most optimistic bulls.    Did it really matter what S&P said in the morning with regard to the conclusion of writedowns from major financial institutions or the housing rescue plan?    We think the market rallied because a lot of people believe that our Fed. will do anything creative to keep this market afloat, while delaying the inevitable indefinitely.     Of course, any policy announcement by Fed these days is greeted with warm welcome.   We just had a super 200 billion "cash for trash" injection announcement and now people are asking for more, at least they are hoping so.

More importantly, we have to understand why we gapped down earlier in the first place.    Perhaps our market here is solely focused on subprime and credit crunch crisis the last couple of days, while the rest of the world is however, only focusing on the weakness of the U.S. dollar and the strength of Gold/Oil.    The weakness of U.S. dollar basically hurts all those countries who export a great deal of stuff to America, which is just about everybody.    The high oil is also increasing the cost of doing business because a high percentage of fixed cost in transporting goods is the fuel.  With the dollar getting trashed, as traders, the only protection and hedge we can use is to buy gold and other base metals.     All of these factors are creating what we call an inflation environment here.     This is still in addition to the credit crunch crisis we are dealing with here that is still months away from being resolved, in our opinion.     The more Fed tries to save the capital market by boosting up the lending programs and lowering the rate, the worse it gets with the inflation as traders use every Fed policy to sell the dollar off, hard!

Fed right now is in a very difficult position as on one hand, they want to stop the bleeding in the financial market.    You have to give Fed credit these days as both the surprise rate cut back in Jan. and the recent 200 billion lending program came when the market is about to break new lows.  Basically, it feels that there must be a chartist out there working for the Fed to try to kill the bears in a timely fashion.     Oh yes, we forgot that this is an election year too.   The last thing Fed or the government wants is a financial market in total disarray going into the election.     This may sound like a conspiracy theory but you just have to admit the impeccable timing of both Fed's announcement the last two months.

Now that we know Fed can and will rescue the financial market, is there anything they can do about this inflation or the recession we are facing?   Absolutely nothing we think.    Both the inflation and recession are part of the economic cycle and it just takes time to get through them.    However, now that the Fed has signaled their intention with the financial market, the focus will be on recession and inflation going forward.    This is why we think the volatility of the market lately is the result of crosswind between Fed and economic events.    To sum it up, people are buying this market because of the endless bailout attempts from Fed while people are also selling at the same time because of the poor economic indicator which points to both a recessionary and inflationary environment.

With DJIM, we'd keep monitoring any ongoing events while keeping score of which sectors are getting bid up and which sectors are getting sold during this volatility.     Looking at today, Oil , Agri/Chem, Steel and base metal were all getting bid up aggressively.  

Just to highlight some of our favourite buy on dips play here, we like Oil stuff such as EOG BZP HES, Agri/Chem POT MOS CF, MTL CLF X STLD from the steel sector.  

On the short side, we still like the idea of shorting tech, shippers and solars on strengh only when fading the move.

Going into the trading day, the focus will rest solely on CPI and inflation.  The market seemed to have a memory lapse going into it.

DJIM #11 2008

Despite the 400pt rally on Tuesday, we highlighted..bulletted what we thought was some kind of significance occurring that was of more importance than the rally. 

• One real concern is the BSC situation that must be resolved.  Good or bad to move on.  The financials, the market were acting too wildly on this stocks back today.

The next day the CEO of BSC appeared and assured BSC was fine!.  We might have not been around the Great depression, World Wars, past recessions that this investment bank survived, but we are here tonight in one piece to see it fall for $2 to JPM.  In so many ways the history of BSC puts todays financial crisis we're dealing with into perspective.  Build-A- Bear workshop ( BBW) even today trades at a Market cap of 169million,  BSC was just had for 236million.!!.   STUNNING developments in respect to the $2 virtually wiping any value of investments by shareholders  , but developments that had to occur this weekend or have more runs on banks because a crisis of confidence may have taken over.   Tonight the FED is proving to be adamant again on doing whatever is needed to halt the poisonous cycle by cutting the discount rate by another .25pts and created another new lending facility in efforts to boost market liquidity and bring some kind of stability.  The boys certainly are working overtime this weekend and last week, unfortunately their efforts are not going to be seen in the futures tonight. 

Emini S&P 1256.75 -34.75 -2.69
Emini Nasdaq 1675.75 -42.25 -2.46
Emini Dow 11723 -259 -2.16

We said 20minutes into the open Friday vibrations will be felt from BSC news. The market imploded soon after. Tonight many a mattress is feeling further tremors.  Tomorrow if panic sets in and there is no intervention, it will be tougher to play the fade and go against the down trend.  It actually may be quite dangerous if we go into uncharted territory..below Jan lows.

FED's sunday night

To understand the FED

Largecapbanks.pdf

Fed means business...

If you think the news of BSC's token buyout by JPM is the focus of the day, we don't blame you.   In our opinion, the real story of the day is the news that our Fed has opened its direct credit facility (lending) program to not only the commercial banks but to the investment bankers as well.   This is why we added the morning Journal piece from todays news hogs JPM titled to possibly soothe the soul.. "Major moves should help markets and credit situation' alert.   (You probably need to visit the site to read this as the PDF's dont got through email delivery).   We didn't grasp the FED facts fully last night, not many did after seeing BSC and $2 a share.   Shock factor was in full effect for the lot of traders..   In addition FED increased the loan period to 90 days from 28 days.    This of course, assumes that you still have collateral (good or bad quality) to exchange for liquid cash.   End of day all talking heads looking at the days action were complementing the FED action.  If this policy was announced a week or two ago, this BSC soap would have never taken place.    One thing we got to give credit to Mr. Bernanke and co., is that once they realized they made a mistake, they quickly acted to prevent same mistake from happening again.  They also prevented a run on other firms today which was the real frightening deal.  Traders also tried to run a few into the ground from LEH to anything having a 'broker' association (IBKR).

Lets first quickly talk about BSC here.    It is obvious that the Fed "allowed" BSC to be purchased ONLY by JPM.    Because this is a rather forced and preferred way, it's really up to JPM to come up with this symbolic offer to steal a company that's in distress.    Years down the road, people are going to see this as one of the "deal of the decade" type of transaction and it'll probably be printed in the next edition of university Economics textbook as a great case study.      The implication of this deal here is that now people are adding "default risk" to financial institutions.      If the traditional thinking is that a financial stock is a good value if it trades around its book value in a distressed environment, it no longer applies in today's environment.    Given what market participants have seen with BSC, they are assigning another discount to the previous valuation model.   This explains some of the ugly action in the financial sector.       We think even though the case with BSC is fairly unique and it may be just one time event within the sector, the thought of having another well known institution to go belly up won't go away for a long while.     You can be sure that financials stocks will be depressed for a while until all of the credit issues have been full resolved and confidence will then be restored.

Now lets talk about the implication of Fed here.     We think Fed hasn't played an active role in a crisis this aggressively in a long time.     For the sake of the stability of our capital system and our market here, we applaud their latest action and we are not the only ones mid day/end of day. Just look at the final 30 minutes after the horrific overnight futures.   Some may argue that this is just a desperate and late move by Fed and they are always behind the curve.    To us, it's better late than never!      The rate cuts will take months to work its way into the system, but the lending program now with pretty much unlimited capital is an immediate relief.    This basically eases any fear that a major institution can run into a liquidity crunch.     We think this is definitely a way to stop a catastrophic collapse of our financial sector.

With the combination of a good closing reaction from the market and the collapse of the commodity prices today, this market may again found a short term bottom earlier today.     If GS and LEH come out with some assurance that liquidity isn't a problem and things aren't nearly as bad as people fear, we think this market may generate enough momentum to start a rally.   GS reports tomorrow.  However, any rally in this environment is still a bear rally and it'd be constrained by the technical level we all should be familiar by now.     Assume the rally takes place after the Fed decision tomorrow,  we are looking at 1320 SPX, 12200 Dow as the first resistance and 1380 SPX, 12700 Dow as the ultimate resistance.     Unfortuantely, at this point, we can only take this one day at a time and we'd see how things develop with the first attempt of a rally.     Of course, the stability of the capital system here only provides that, the stability.     It doesn't preclude us from having a recession and inflation still.

The commodity prices 'apparently' all reversed today and took some pretty heavy damage.     In our opinion, if this is the first drop in a while, we are inclined to buy on the dip.      Remember, the decline in commodity price may be fast and dramatic, we are still in an environment where this is still a bull market in commodities.     Until the day Fed stops printing and pumping paper into the system, and U.S. dollar gains back some serious ground against some major currencies, the runup in commodities is far from over.     The next couple of days may present us with some good buying opportunities in some of the names we like and we'd be prepared for it.   Best is to go through the Journal and catch up on the highlighted names in each sector and make sure they are not missing from your watchlist.  Charts are up for a few as well.

Today feels different.   If we didn't blow up again at lows, you wonder what it would take if today's BSC debacle didn't do it?.  We just need to hit or come close to the trifecta Tuesday ...1.GS  2.VISA ipo 3. FED and we could be off to the races in the short term.

Update on Tuesday, March 18, 2008 at 01:16PM by Demi/ YourPersonalTrader

Correction: VISA will price their IPO on Tuesday and trade on Wednesday, a day earlier than their prior pricing/trading date. They will be issuing 406 mln shares with a price range of $37-42.

"420" smokin out the Bears party ..

Where there's smoke...there's fire, or as in the case of the market, there's the smell of Bear hide after this days trading...

Maybe we didn't get the straight combination trifecta, but headlines of #1.  GS earnings, #2. FED, #3. VISA ipo pricing in mid $40's after hours is close enough.   All coupled you have to say we were off to the races.    How else would you describe a +420/91/54 ticket!.    Today was a beautiful follow through and a great reminder of why we love this sport.    Hopefully, we guided you in the right direction and you were prepared so far this week.    After all...trading is about preparation, whether it's through charts, due diligence or just experience and knowing what and where you should be trading at certain times.    As always, the point of the Journal is to lead, to give insight to our thoughts in respect to the markets and the stocks within.   For many of our members this is a huge time savior.  No clicking through hundreds of charts on a daily basis, no real due diligence on companies etc.   We provide the traders insight, trading methodology and the stocks to watchlist and use it on.   We don't need a 100-300 stocks to monitor, we have a compact Grade A watchlist of maybe 40 stocks that evolves day to day.   The worn out get tossed to backup lists, fresh faces emerge all the time.  Some previously used up and brought back and recycled.   This is plenty to be very profitable on and it's easy to follow.     We only have to watch the ticks on our stocks/list, concentrating on what is already in front of us and not going through endless pages of other information, trade prospects intraday.     We run a shadow service you might say.    So, let's leave all the hoopla to all the others today and focus on how this played out from here in about 48 hours and how you could make the most  advantage out of DJIM, especially if your are new to the scene here...

• Sunday night, we all got the shock of the $2 deal for BSC with the futures pointing down big time overnight.    We discussed the significance of BSC the previous Tuesday, it dampened that Tuesday rally for us.   Lost in the translation Sunday was the FED activity, we gave it half the Journal ..."Tonight the FED is proving to be adamant again on doing whatever is needed to halt the poisonous cycle by cutting the discount rate by another .25pts and created another new lending facility in efforts to boost market liquidity and bring some kind of stability.  The boys certainly are working overtime this weekend and last week, unfortunately their efforts are not going to be seen in the futures tonight".   Well, it might not have been seen by many as very important that night,  but 48hours later every talking head is on this ground breaking move.   Guess, its ground breaking when you see the powerful SPX climb from 1257 to 1330 within that time span.lol.     Come Monday at 730am, we shared a JPM report and the major changes within this next FED tinkering.   If you read the report, you were probably not surprised by the fight the market put in the morning at the lows and the springboard follow up.   So what should we all do?.   We go to our fave lists and start looking for something to chew on..trade.   You don't need us at this point to pick a stock, you should know by now what you favor after trading it many times over at DJIM.   You know what's been working the last month or two!.  This is what we meant by the ' usual suspects' we'd be buying in alerts 40 minutes before the close if the IWM popped 65.50, which it did less than 5 minutes later before giving way to last minute selling.   SAM a 5% day now sits near highs and CLHB are two others you should have on your Grade A list as we do.      We talked before Tuesday's open... "If GS and LEH come out with some assurance that liquidity isn't a problem and things aren't nearly as bad as people fear, we think this market may generate enough momentum to start a rally".     No guessing who were the darlings today is there.    The prices in premkt was the alert everything was rosy, we don't have to alert these things.   We also said,.. "The commodity prices 'apparently' all reversed today and took some pretty heavy damage.     In our opinion, if this is the first drop in a while, we are inclined to buy on the dip".    Apparently to others because we don't really trade Golds and Silvers.  The dip was Monday and we were buying them the 'usual suspects' late..anything like the often mentioned FDG,CMP,X, MOS etc.   You could have been buying late Monday or early on Tuesday any of our closely followed stocks and had a nice day by 11am after the GS/LEH gave the green light.     We outlined our intraday set ups today because it was an important day and the intraday ticks we were eyeing, we did get a stop at 67.0-.10 on IWM and guess what?.   The support line 65.50S was the bounce level after FED's .75 and then after kissing 67.40R for about 10-15minutes, the IWM exploded and the market followed in tow to a 420 day and left the Bears up in smoke.

If we thought Monday's day felt different than all the other reversals,  we are even more inclined to believe this has legs in the short term following this monster of a day.  The sentiment has changed, there is confidence emerging and there is of course lots of money on the sideline that won't want to miss the potential reversal of fortune.  In just 48hrs, the Bears $2 BSC ticket to market riches got screwed and there must be exhaustion setting in.    Coming into Wednesday trade, we expect a dip at the open or shortly, but we feel the trading environment has changed and money will be buying the dips, especially money coming off the bench.   We also have the advantage of a holiday weekend where the shorts may just rest instead of dealing with 3 days of what ifs.   Lots of the focus will be on the VISA IPO and will signal lots to the market. The pricing has already, now it gets more interesting to see.  We played some MA into this day even though there is this misconception that investors need to switch teams and do VISA now.   Actually, its mostly one ponytailed talking head spreading this smoke.  We think why not own both!. The painted close erased quite a few points, but AH's it climbed back up 4pts and we sold some just in case.  We'll look to re-position in this long running DJIM stock as we get a feel for the sentiment on VISA's day.    The GS and LEH are definite buys on dips going forward from here.   MS may add to the sector fire here today.    A few notes on our closely followed into the trading day, AG's-chem, the MOS and POT got some negative press from Barrons Online and either a early sell or buy the dip or both scenario exists here.   Also, some coals were upgraded at JPM this am (ICO, MEE).      Again, a reason to buy the dip when the market gives it.   This group is led by FDG in our books.   JRCC did a mall offering and will give an opp on the dip.   Remember the recent EPS day, if not just look at a chart and you'll clearly see what it can do. 

Oh yeah.."420"..guess you can Google it or ask your kids about..

Commodity Crunch Shalacking...

Never have we experienced so much emotion like the last 7 or 8 trading days.   In another week or so, we may as well merge our market with Hang Seng or Bombay exchange!.    The volatility with our market makes us wonder if our market is just another emerging market.    Of course, every day there's always something you can point your finger to and say "that's the reason that took us down(or up)".  It might as well be the Beirut Exchange with almost daily bombs knocking out either the Bulls or Bears!

Today was the commodity crunch and a huge unwinding out of the blue.   There's no doubt about it,  if it wasn't for the fact the commodity crowd are all trying to exit the door at the same time, led by the hedgies, we may not look that bad given Tuesday inspiring up move.     Right now, you simply feel disgusted!   It seems like this was all orchestrated to happen the day after FED.  Today's action just isn't good for either the bulls nor bears.    For bears, a lot of them covered Tuesday thinking a short term bottom was made and a crisis relief rally may be at hand.    Bears should be upset about the quick turn of events today because not only they felt like they covered too early, it's also difficult if not pointless to establish new position today.     For bulls, today's action is nothing short of heartbreaking as any long positions you established yesterday or earlier today would've been beaten bad by the end of day.     This is one tough and mean and ugly market.  

So what happened to the commodity prices?    Apparently, the recent popular trade to long all of the commodity just got too crowded.    When it's apparent that Fed is ready to take action against inflation by cutting 75 basis pt as oppose to 100 and also the announcement of rescue solution to our recent liquidity crisis, some institutions are not hesitant to lock up profit and clear out their momentum oriented commodity position.      These days, information travels fast and it just doesn't take a genius to notice some hedgies-institutions were selling big.  Then it's just a matter of one thing leads to another and all of a sudden everybody is booting out their positions, including the frightened retail trader, in whole or partially.  Here's the explanation heard most from the trading floor, ..."today's sell-off in commodities, suggesting it is the result of de-leveraging. Says following BSC's implosion, other prime-brokers (those that clear for and service hedge funds) may have gone around and called for de-leveraging at the funds. Notes this was equivalent of a margin call at the funds, triggering the selling. Says hedge fund world may look to replace the brokerages next."

What about the rest of the market?   Two words, "collateral damage"!    We know that this market is full of leverage and when one crowded sector gets dumped big, everybody feels the pinch and start to clear positions to make room.     Institutions need to sell stuff to make room for cash in case of further decline or if their large  "good" positions dropped so much that they are in danger of a margin call.     When things go bad, big leverage means big liquidation.

Tomorrow is an option expiration day for March and it won't be a quiet day.    In our opinion, if you believe that the commodity market is NOT finished like we do, there'd be some great opportunities in the next couple of days, including yesterday if you had the guts to enter late.    The key here, is to go gradual with the purchase.    We are planning to buy back some of the positions over the next two to three days.     For example, if we decide to buy just 500 shares in a position, we'd use 5 different orders of 100 share each and spread the order over two to three days.    That way, we know that we won't get the absolute best price but we won't get a worst price either.      This is to assume that the commodity market doesn't go into a real free fall.    If after next couple of days and the price continues to fall, we'd set a stop price and let it play out.     The risk/reward here favours a long trade in the commodity related plays.    As long as we spread out the orders over a period of two to three days, we'd have plenty of time to prepare and react in case things point to more than a mere correction. 

Today was anomaly of sorts, it is not every day Gold falls 69 buckeroos (6.5%), Oil tumbling 4.5%, CRB index 4.1% and a strengthening $.   It was a surprise, well more like a shock considering the timing following the FED.  If it wasn't forced selling by hedge funds looking to deleverge in order to meet margin calls, but just rumors leading to such then we can expect a fight back.  Either way, truth or rumor, it's disgusting and us the little guys are just pawns in their game.

Primary watchlist

A primary watchlist comprised of DJIM's closely followed as of close.

DJIM #12 2008

We don't like to dwell on the past, even if it's just last week, but what we experienced in all of 4 days last week may be remembered as a turning point down the road.   The BSC debacle, the commodity carnage, the FED cut(s), strengthening dollar may have intertwined in such a way that it signals a change of direction.   Still, even if we were all 95% sure of this, would we all throw our money into the market come this week?  Probably not, so let's not give a hoot about turning points and just take it day by day as we've been doing for a long time now.   Downside risk is not going away, even if the markets rally from here as the economy is no better shape than it was just days ago.  Volatility isn't going away either, we've had 28 days of +/- 1% days in the SPX already in 2008.   This week eyes will shift to Economic data and any pleasant surprises would fit perfectly in with last weeks action.    We're also about 2 weeks from a crucial earnings season kicking off and you know we don't believe in a market tanking just before such events. http://www.nasdaq.com/econoday/calendar/US/EN/New_York/year/2008/month/03/day/24/daily/index.html

As you know we didn't lose faith before the open Friday , even if we had every reason to be discouraged by the commodity free fall on the heels of a 420+  FED day.   We saw and still see the BSC and FED intervention on that Sunday as more integral to the market than the commodity shake up we witnessed.   The reports from GS and LEH were also very important ingredients for the financials and helps point to a bottom being put in on the sector.   This is much more important than any commodity bubble getting its due at this juncture in our view.   Early Thursday, we noticed IWM attempts at 67.40 and the more times you kick at the can, the better chance you have at a break move.  We also had some promise showing from GS/ LEH show up which coupled with the previous spelled a potential redemption day, we also noted the potential short covering to help out going into a long weekend.    The late afternoon was great and if playing our investment firms..GS, LEH you went into Easter weekend quite happy while the Bears were left scrambling and getting demoralized.   Being just under12400 DJIA at the close is significant, a move through here should take us to 12700-800 levels again.  

• So with this in mind and our readers, we've included a primary watch-trade list as of the close Thursday to take us into this trading week.  Setting this up relates to a Journal earlier in the week.  Some like the ETF's are for directional purposes on the market intraday, one like MF replaces the recent listed MBI/ABK to see trouble on the horizon intraday.  Stocks like AEM, SWC you don't see in Journal or alerts yet are there to monitor and trade a potential reversal in the Gold/silver miners at some point soon.  The other groups/ stocks you should know quite well from our pages.  Some like CHLB, SAM, HURC, LNN are recent EPS'ers of interest.   If say some stock is in the news premkt Monday, we would add it to our primary list and remove a Ag-chem stock like MON-CF to a secondary list b/c we really don't need 3 or 4 of them up on primary as they go through troubles now.  We don't need 5 Solars..Shippers on now either, we'll get all the signs needed from the ones we have up now to know if we should add a few more intraday to our main list.  This is a daily process, adding..subtracting..recycling stocks/sectors.  Simply, you don't need to complicate trading, you don't need tons of stocks to monitor or build yourself a wall of monitors to do well. 

We've held over the 3+1 subscription offer till March 31st as a few members are coming up for renewal at the beginning of the month. As of April 1st, the offer will be removed from Subscribe page and no special requests will be accepted. Thank you.

Tradable Rally...

Whenever you have back to back up days like today and last Thursday, you always feel like you have a lot to say.   The truth is, action today should not surprise us given the rally thesis we were envisioning since last Monday.   So have things improved a lot since a week ago?   Yes and No!    The trading psychology and sentiment have definitely shifted somewhat.    For now, there is cause to buy on dip!  The reason why we are saying this is that we may have just witnessed the bottom action of financial stocks last week.    The capital market, as we have been saying all along, is the most important pillar of our and world's economy.    Just imagine without the efficient flow of money in the system, none of the business would even function properly. 

Just to recap, we were near a meltdown in the financial market one week ago and it was saved by none other than the Fed.    Dislike them or not, Fed officials are the ones who stepped up to the plate when the time called for them.    The rally last few days is definitely caused by the renewed confidence in our financial sector.     Things may not have changed a whole lot economic wise, but an intact financial system will give us enough confidence to look forward to see through a recovery in growth or to avoid a deeper recession.

Slow down, Cowboy!.   Right now, we are hoping that this rally would just slow down a bit.   The faster it goes to the next major resistance point of 12700 on Dow and 1380 on SPX, the more likely we would just bounce off and retreat.     The slower and more consolidation this market gets before it gets to those levels, the more likelihood we can at least give it a good try to break those levels.       Judging by the pace of trading in recent weeks, we don't know if what we ask(consolidation) is even possible.     However, with the financial woe out of the way for now, we are just hoping any dips next little while won't turn into a nasty sell off.

Believe it or not, in the next couple of weeks, we are into the pre-announcement period.    This means that we are near the next quarters earning period again.    Time sure flies!     Just to warm things up, we have RIMM and MON reporting on Apr. 2nd and we'd for sure keep our eyes on it.     In our opinion, last week's  bottom may be the short term trading  bottom for the next little while.    We still can break lower but this market needs real confirmation of recession before we can head much lower.     One possible scenario is that we'd have a string of negative economic reports and as well as a dismal second quarter earning report from major players to send this market into a tailspin.    Of course, that scenario won't develop right away and we'd still have at least till May to get some good potential long side action to play within the next few weeks.

Now onto some action...if you set up a copy of DJIM's watchlist this weekend, you definitely got some green action to sell into nicely!.  Besides the JPM-BSC noise, we definitely got a "pleasant" surprise from the ECO data (housing) that fit perfectly for a follow through from Thursday..

Most of the plays on our watchlist did well today with some notable strength from steel X, solars and shipper sector.     We are still a little wary of the agri/chem sector today as it looks like they aren't done correcting.    We are also a little cautious on the oil/gold/base metal as well as these are better to buy on dips as oppose to chase on strength.     The group that stands out the most today is the technology sector.    Everything from AAPL, RIMM, to BIDU and ISRG GRMN all performed well.    We think these types may get some good momentum into their earnings dates.

Bottom line, we are praying that this rally slows down and give us some better entry point to reload on.    We are in the full buy on dip mode with the above sectors until something dramatic happens.

Sideways

As market participants we've become so used to turbulent days that yesterday seemed like too long of a walk in the park.   We've become so programmed to violent times that even slow sideways action that is 'good' for the market is excruciatingly boring.   Guess..we've just become adrenaline junkies relying on news headlines good or bad to get our fix for the day.   Yesterday was rehab for a day as normality returned.   What is left from the sideways action might as well be construed as constructive action.    We wanted the market to slow down from this recent rally and it did.    That's good part 1.  Another good point is our watchlist here at DJIM was 95% green, which would have given many of us some room to maneuver out of positions if we wanted to and told us we have a good bunch even if the market is mixed.     Right now, we are maintaining the idea of buying the dip on many of our favorites, yesterday was frustrating as most provided no such luck.    Instead many continued to run forward, especially the often mention lately names like X ballooning to nearly $127 intraday.  In runaway cases like this, we'd start to look more closely at other steel stocks that are behind the X curve like a MTL on our list if we can't get a dip on the best name out there.    Maybe , we'll get a little retrieve today to snag a few favorite names back.    Maybe the most important takeaway from yesterday was in premarket when MON raised guidance heading into earnings season.   As we noted heading into the trading day, pre-announcements are on deck and some reports are due that will most likely tell us if we are going to move further to the upside.    MON's raising guidance is a feel good start and comes at a time this sector was showing signs of slowdown on the trading end here.   MON's guidance holds the other Ag-Chem stocks on our primary and puts the junk small ones back on radar.   Maybe not on our radar, but maybe for some of you that like to play the cheapies like SEED.   One sector we started to watch is the Rail segment and added CSX as a start to our primary as it made new highs.   So basically not much to add here this morning, we're in buy the dip mode intraday and hope for some good to come out of ORCL after the close to set a tone.