GE who?

Short term memory.   Isn't that just the beauty of the markets and specifically earnings season!.   Just last Friday the global sky was flying and the noise of GE was vibrating into our eyes and ears for the next 72 hours, now INTC supposedly has solution for everything and anything and GE was just a bad dream.    Not to put a damper on things, but let's not get the bubbly out just yet!.    Sure...there are many a trader bludgeoned this year with an infatuation with tech and we welcome them back to bid up the market.   Hey, we can't eat coal and steel all day and every day so we'll help them out today, it's the least we could do with their beaten up techs.    But..today is only today as we don't really trust the lot and we need to really have them show us the money day in and day out this week.   Just like GE never happened, INTC maybe quickly forgotten if its brothers and sisters don't play fair the rest of the week.    Our strategy ain't changing overnight, we'll follow the herd and slice and dice the high beta's stocks  AAPL--RIMM--BIDU etc. for the moment, but we're not changing our diet that has been very, very good to us all.   You wanna see earnings!, wait till our stuff like the steels give guidance, it will put INTC's #'s to shame.    Anyways..on to yesterdays pre-INTC trading day....

Coals, this bunch seems unstoppable.  All we have to say is "look to MEE very soon as the chart looks to be setting up" and the damn thing explodes to over $50 even after gapping some. lol.  The good thing is these guys give you more than one opportunity a day as they slide down and give an another opportunity to enter in.  The same goes with PCX, if you didn't catch any of the previous days move it's all good cause you had a very nice chance to get some cheap yesterday.  FDG, WLT we like them all and whichever coal dips right is the one we are favoring at that time.

Solars,   with oil spiking to 113 it is no surprise to see these moving up.   Earnings are around the corner, SPWR corner is tomorrow and we are anticipating their numbers to dictate a lot of the action in days to come.  So we wait to dive deep, but it doesn't mean we're not dipping in our toes.  We did that with a fresh face yesterday in SOL for a few reasons.     We liked the supply contracts, we like the fact if the sector is heating up a 10million IPO name breaking out to a new high will get attention from traders.  It also has a pretty darn good IBD number and even if we haven't played this IBD $15 game for a long time, a solar that is eligible for IBD is hard to find!.    So, why not SOL to be in print!.    Too many continued to play the 15 dollar game at IBD for months now and it was a futile game.  What you need is not just a rating, you need the stock to be in a hot space!.    Maybe TITN was the last we recall and that was only because it was in the right place at the righ time (Ag').  We were quite aggressive buying it up yesterday.

A note EBAY is reporting tonight and so we were toying the idea around of MELI busting a move. 

..off to flip the pages of reports..the rush is starting with MBT, LUFK, CSX ...

Smell the roses...

Even before the market started trading today, we all knew that this was going to be a good day.   We just didn't know it could be that good!.  Not only did INTC provide us with some assurance that things aren't that "bad", we also got a couple of reports from JPM and WFC that were well received in the pre-market.     Economic data today was also inline and some big news from Potash all set the stage for a very positive open.    Bidding up some technology stocks was easy after Intel's earning, but never in our imagination that the rally today was so broad based.     There's literally hardly any stocks that finished negative on the day and many stocks finished 4%+ with some notable gainers from techs and agri/chem sector.  Our DJIM list lit up like a Christmas tree and it's only spring.

Oil gained again today and gold finished quite a bit higher.     U.S. dollar hit a new low and every commodity play got a bid today.   Yet, equity index held steady and finished near the high of the day as it grinded higher and higher.    Today's is one of the most steady up days we can recall in the last few months.    So what is wrong with this picture?    Nothing!     This is the exact theme we have been playing for months at DJIM.     As we pointed out for weeks, commodity market is basically in a bull market and any strength in equity market will bid up every commodity related plays as well when the time comes.

Here's the dilemma!    We think if it wasn't for the commodity market, which is becoming a bigger chunk of the equity market these days, our overall market might have been at a much lower level now.    Yes, we think that commodity market is the very reason the entire market did not crash lower the last few months.    It is strange but think about it.   Do we get up early every day the last few months knowing the credit crisis is bad and economy heading towards the recession and sulk?   No!    Because we've had plays such as POT, CMP, X, FDG, DRYS..... to look forward to.     Money has to flow somewhere to get some respectable return and it sure isn't going into treasury as you'd expect.

Here are some sector run downs...

Techs, with INTC's not so bad number and IBM's pretty good number out of the way, we'd expect this sector to heat up again.    No it doesn't mean that we'd challenge new highs soon but it just means that sentiment will be changed somewhat.    These days, an inline report will get you a nice price boost given that the "normal" expectation is for you to guide down.     We like beta plays such as RIMM, AAPL, BIDU because they really play into the psychology of "tech is still worth trading up".    Of course, GOOG's report Thursday is also significant and we feel that the combination of a low expectation from Google and the uncertainty of its report can potentially give traders another positive surprise.   Again, we don't play into the earnings, but if the report is half decent, we think GOOG can get back to $500 easy.

Coal, some of the names in the group will release earning soon and we'd continue to keep a close eye on this group.   We feel this group is getting the kind of action that's similar to the agri/chem group couple of months ago.    If this group has some positive things to say in their up coming reports, we'd be very aggressive in chasing some names up.     As far as trading wise, this group has been a champ last couple of weeks.

Agri/Chem, the biggest question right now on most people's mind has to be "is there an end to all this madness"?    Stock action wise, we are not sure at this point if the run-up will end any time soon.    News wise, we think this group will only get more and more good news down the road.   Basically, this group has the kind of pricing power any other industry would kill for.

Solars, maybe once FSLR hit $300, we'd finally get some rest. lol   We think the key in this group is not about their earning power, it's more to do with the oil price these days.    Basically, with the way crude moves, this group has nothing to lose.    We'd buy on any small dips at this point.   We like SOL the most at this point and we'd play very aggressive on dips with it.   SPWR earnings Thursday will be closely watched by solar junkies.

Shippers,  recently we alerted to these guys saying sooner than later they will ride the wave of coal and steels and that idea is paying off big time.    We also don't think the move is over as all the commodity stocks are hitting new highs left and right.    We've added back EXM to our shipper list today.

Steels, just buy the group! lol   Ok,  NUE is set to release report tomorrow and we'd see how others react to it.    This is actually the group which we have the lightest exposure now,  but we are waiting for opportunities to get back in.   Congrats to X hitting the $150+ mark, yep it was around $110-115 when we alerted first.  SCHN, MTL,STLD wow as well!

Oh yeah and MELI busted the move didn't it!.  Yesterday was our exit day pre Ebay report, it's been a good ride since being alerted and now we back up momentarily.

Bottom line, things are getting apparent that not every company is being affected by credit crisis and a slowing economy.     We should not treat every company as if it's the next GE or BSC and be rational about the whole situation.     In addition, we are still enjoying this ever lasting commodity bull market.

GOOG-OX

... a gangster slang!.    A bull slang today!.     How fitting for a 500 pd OX we said we'd see if it just reported decent numbers yesterday........Goog'ilicious...Googie me.....whatever we use, it's all good today.   Only in Australia, a Goog is an egg, right!.    As long as we all stay inside and google all day, there is no recession and Earthquakes don't happen in Illinois.    Let's work with what we got last night as traders and nothing else....quite simplistic!.     If we don't hold the gains.. if we don't as bulls kick ass with this $70+ buck GOOG move on options expiry day, we need to really worry.    We don't want a rush today and if we spurred a new beginning this week, there will be of plenty of time to get into a potential breakout from the range bound trading we've been in seemingly endlessly.   There is so much fent up range frustration here, it maybe explosive in days, weeks to come.    We may just watch like TV today and prep for a weekend of drink and peace;).    We noted, we wanted to see the brothers and sisters step up and follow up INTC .....well, they have one by one this week!.   We've used the commodity stocks to blind us to the rest of the market , the economy so far in 2008 and this potential turn is seemingly perfectly timed if you've followed our methodology, our sherpa to the market.   Your book, your portfolio should not be looking to take advantage now and say it will make up lost time!.    There has been no lost time as far as we're concerned, the potential has been here to walk out of these treacherous months almost unscathed at this juncture if approached, shadowed right.     If you're still here it means you've survived with us, thank you and thanks for the emails, we've all been taught lessons and are better for it as traders as we go forward!.    Nothing brilliant we want to add today, lets see how it plays out, we can only giggle today thanks to Google and the hood at some of our favorite egomaniac doomsayers shortie bloggers.     They could be right and there maybe no America, no market one day;).....they might've been right for a few months to be short,  but screw them cause Djim'rs balances should be just fine and in tact to take advantage of what could be coming.

"....All we could say again is our mouths are watering, especially at the prospect of Bears foaming at the mouth shortly.  Uuuahh, we're getting nasty;)!  April 9,2008

 

Oh-no-Bull warming...

 Our favorite bloggers...

 

DJIM #16, 2008

Before you know it, we're here sitting at the high of 2008.   How'd that happen the Bear is left scratching his head!.  If you have really followed all of the news events up to now, things are still pretty much the same as at the beginning of the year.   We still have potentially more write downs from the financial sector and the economy is still in a recessionary mode and inflation worry keeps on making more noise by the week.     Yet,  we just finished the hottest trading week in 2008 so far and traders are more excited than ever to look for action in the coming weeks.    This is of course, assuming that you are trading on the long side of things.    So why isn't the market crashing given all of the negative news we had do endure the last few months?   We have already discussed this topic many times at length the past few weeks,  but we'll sum up the points again just in case you missed the various highlights.

The reason why we think this market has turned positive lately is as follows...

1. Commodity plays!   We think commodity plays are the #1 reason why this market just wouldn't be pulled down any further.   If you have followed our journal from the beginning of the year, you can tell how much emphasis we have put on the commodity sector.   Oil, Steel, Coal, Agri/Chem, Metals, Shipper, Solar... and all of them have provided leadership at one point or another for the hot money.    You can say this is the year of commodity and if you've only traded these from the long side as the premise has been here, you'd never have to care about anything else in this market.   We believe the collective bullishness among the various commodity plays are helping the sideline money to be busy at work.   Basically, as long as one's willing to commit capital into this market, it's just a matter of time before one's willing to "diversify" his/her portfolio.

2. Earnings!   At the beginning of the year, we all believed that a recession or at least a slowdown in growth is inevitable with our economy.   We just didn't know how bad things would get.   But, one thing we emphasized here is the market wouldn't get beaten down as we went into earnings.   It didn't, did it?   It is true that companies like GE and many financial companies don't give us a bright picture to look forward to, but we still have companies like IBM, INTC telling us that things don't look that bad.    Also, when you completely write off GOOG going into its earning, what you potentially get is an 80 point gainer day after it delivered a not so bad report and the $500 we said it would possibly hit off such.   So what it means is that not every company is going to be hurt badly by the slowing economy and when you cut a company's stock by 40%+ in as little as 3 months, you're only setting the stock up for positive surprises and therefore big moves.  This is simply what we are seeing!

3. Fed!    Mr. Bernanke and company mean business!   They have shown us that they'd do everything they can to protect the integrity of our capital system as hard as it might seem.   Even though the system needs lots of improvement and reform, it is just Not likely to fail under Mr. Bernanke's policy.    Let Bear Stearns be the first and last major victim from this financial crisis.   Basically, even as a trader who doesn't really have an opinion on how things should be run in the financial sector, the trader or anybody else doesn't want to see a failed system either.  It's in the best interest of all.

4. Idle Cash!    Basically, with the rates already so low and more rate cuts on the way, it's just absolutely ridiculous to keep your money in money market account or treasury.     When you take into account the potential inflation, it's even more pointless to keep your cash in cash.   So, money has to flow somewhere right?   We think so!   If you are afraid to invest in the banks, there's always one commodity sector that can attract your dough.    Now that some of the companies have reported some not so bad reports, there's even more reasons to get back into some selective plays in this market.

Now that we have listed these four major reasons why this market would not go down the last while, does it mean we can go back up and challenge last year's high?    At this point, we think it's not likely that we even have a shot to get back to last year's high.    For DJIM, we try not to look too far ahead of the curve and we try to take advantage of the current opportunities.  That's always the motto here, we let others worry about the consequences of this and that.   We're traders and we trade, it's quite simple.   It means that we play what's working NOW as opposed to what might work 2-3 months down the road.     By having an active watchlist, shadowlist at DJIM, where we constantly update the play selection through Alerts'Comments or daily Journal, we all should have a very good feel what this market wants and what it likes.     This is a pure game of psychology.   Knowing what other people want makes our trading decision a lot easier.     As is the case with DJIM in the past, we try to catch the obvious and easy plays.    Instead of figuring out what may work down the road or go nuts with charts,  we simply capitalize on what is working now.

Technically, we broke above major resistances on past Friday thanks to the Google report.    Since we are somewhat in unchartered territory, we now have to move our resistance level to the next stage.   The words Bull trap will be bellowed out now by the Bears, hey what choice do they have.    Bull trap or not, we've been enjoying a Bull run here at DJIM to get to this point to trap money in our pockets.     Dow 13000, SPX 1420 and NASD 2475 seem like a good area of resistance to us.    It is hard to say how fast or even if we'd get there, but we think the best opportunity for the market to get those levels is within next couple of weeks as the earnings keep hitting.    We feel we are currently in this earnings' "honey moon" period on the heels of Google, IBM and Intel reports, so now is the best time to take it higher.    In the coming week, we have quite a few interesting reports from commodity sectors we need to keep our eyes on.    Some of our favourite plays like FDG, AKS, POT... are all set to release reports in the coming week.   Also..with a good trading environment now, we may see momo money come back for those cheaper EPS play we all have enjoyed for years together.   So, let's all keep our eyes wide open for that potential coming to fruition.

A note on SOL!   We were anticipating an IBD100 inclusion last week on this play and it debut at #27 this weekend.    We really like this play at this point because of its recent momentum and now added IBD exposure.    If we get an IBD induced sell off in the coming days, we'd be almost surely buy that dip.   We already had one late last week to possibly take advantage of.    Based on its recent news events and the rosy outlook of solar sector, we think it has a lot more upside momentum to come.

If you think some of our hottest plays are extended, that's fine, we can always take profits right and move on.   Right now, we are about to be flooded with earnings this week and we're looking for fresh meat with possibly more upside potential than what we've already been extending for a few months.

Happy trading! 

...jus' like summer

Mondays trade resembled a summer's trading day.     Not only was the weather too hot where we are, but the volume on the indices was full of nothing but smog.    It was low and it might've taken a little effort for many to see through it and get a read.    After last week big gains, we were looking for some profit taking and corrective action to come in Monday, we'd have no problem with that!.   Instead what we got early was a nice report from ACI to help push all the other coals we've been covering here, most to NCH's( new closing highs)..JRCC, FDG, PCX, MEE, AKS, WLT.    In our view, this coal action was just a bonus following Fridays and an excuse to take some profits.    It's not a surprise to see great reports from this sec' this Q.    We've been buying this sectors stocks a lot on dips the past Q as they seem to provide some of the best around before making a nice recovery.     At this point with many reporting earnings, we were thinking we'd be getting this opportunity as they sell off on the news.     Unfortunately...the way they traded into the afternoon we were starting to think we'd sold too early this time around.     Considering, we began covering this sector when JRCC was in her low teens and yesterday hit high $25's, it is never a bad idea to sell a group and regroup.    The action in coals was in other commodity stocks as they all benefited from higher crude and metal prices, which offset the impact of weak financial stocks.     We did see pretty good action in the big 3, we trade here from the tech/internet sector, RIMM, AAPL,BIDU.     All in all, what seemed like lacklustre day too many a trader was nothing but as we all can see yesterday by the DJIM watchlist, shadowlist.   Those visiting DJIM can find the list on the next few pages of the Journal or a smaller favorites list just by looking at the Charts section where you find a few other stellars making NCH's,   CMP and V

Oh yeah let's not forget on of our most recent plays, SOL which had a great open climbing to almost $19 bucks.  Not bad for 5 days work from $14.   Again, keep looking to add and/or buy-back on dips as has been the strat.   As long as oil is roaring mad, solars should play along.

Some may have been upset we didn't get follow through gains after Friday, some on the other hand may have upset we didn't get a pullback. Even though we are expecting some sideways to consolidate the recent gains, a pullback would be welcomed here so we may pick up back some of our beloved.   But, by the looks of things a pullback is not going to include our niche of stocks anytime soon and so we maybe S.O.L!..lol.   In other words, in conclusion, we are pretty light as far as positions are concerned now,  but are itchy to start buying this market up once again!.

Slow things down a bit....

Basically, as much as we'd like to see 200+ pt gain every day, the best course of action for this market at the moment is to chill.     Yes, we have broken that all important resistance level last Friday and now comes the task of defending that level as support.    Because we are still in the midst of an earning period, the market will tend to be volatile because of the uncertain outcome of earning reports.    We'd allow this market to go 100 points either way, as long as there is strength in selected plays.    We cannot control nor predict whether a market will go up or down 100 points tomorrow, but we can definitely take advantage of opportunities that are presented to us.    This is assuming that we are on top of our game and know exactly what to look for.

Today's slide is mainly from the technology area and we aren't particularity concerned about that.    Yes, some of the tech names have gone up tremendously ahead of their earnings and it's only natural to see some pullback.    Frankly, if AAPL's earning suck tomorrow, nobody wants to pay $150+ for it.  It's as simple as that!.  On the other hand, the commodity market is still alive and kicking.   What else is new eh?    Honestly, this is getting to a point where we don't even care about any sector other than the commodity ones we've been stalking.     It's not that the commodity plays go up the way like in the dotcom days.   It's the fact of how scarily steady they go up with respect to the overall market.    It doesn't seem matter whether we have a down market or an up market, there's always one area of the commodity market that's getting hot money.    In today's case, we have oil and agri. and shippers and a selected steel MTL, we long ago said might follow in the footsteps of our big play (X) when it dipped into $110's.   To us, that's more than half of the plays on our watchlist, your DJIM shadowlist.    To some, this may get frustrating as the inevitable question arises "why don't some of these names pullback for once?"     Well, this is the perfect illustration of hot money flows.    Is this going to be a bubble waiting to be burst?    Frankly, we don't know and we don't care at this point.  They blew it up once recently and we came back and said this is not 'dead' and soon after it all started up again!.   Only thing we have to say at this point is that, if you don't trade the commodity this year, you will be greatly under performing those who do.

Now some sector digestion in no particular order...

Oil, it sure is getting hotter out there and we are not even through April yet.   What ever happened to spring?   We literally jumped from freezing temperature to mid 20s C in a matter of a week.    This can also illustrate the market with oil right now.    It just feels like there's no stoppage, now that the summer is coming, which is seasonally strong for oil price.    As far as plays wise, we are sticking with some of our popular ones like HES, EOG, RIG, XCO, ATLS and BZP.   

Coal, with earning reports out of the way from BTU ACI and FDG.  We only have a couple of interesting ones left to report.    We are looking to establish some good positions next few days hopefully on dips.    The story with this sector is again demand + pricing power.   The current reports may not justify the future potential of this sector.

Shippers,  just about every shipper had a good day today and this is more of a recent sector move than anything.   We started getting very bullish on this sector at the beginning of April and it's been paying off nicely so far.   This is a secondary play for the commodity market, but it's a very important sector.    Basically, you have only so many vessels and you can only built so many of them a year.   The rising demand of commodity will give those shippers good bargaining power down the road.    Most of these shippers are already trading at a very low P/E so now it's the matter of change in perception as far as trading goes.    DRYS, EXM and TBSI are of course our three top dogs we like to trade and we'd stick to them for the next while.   We rode them last summer after alerting the sector and we are once again since the start of April.  If you're visiting DJIM, you can go to our Alerts-page and /or search our stocks through our search of Journal entries, or just keep scrolling down these pages and see the stocks we've been playing highlighted in bold.

Agri.,  about a year go, not many people have even heard of POT.   These days, you can't log into a trading system without at least checking to see how much POT is going for on the street.   How ironic, eh?    The success with POT has everything to do with how huge the IPO of IPI was today.    IPI is a pure potassium play that markets its product to America.   Given the scarcity of this resource and the increasing demand of this ingredient in food planting, IPI will likely get some more momentum down the road.   POT is reporting on 24th and we think both the report and guidance will be good.    It's hard to say how these stocks will react initially, but we'd be buying/ recycling on any weakness.

Bottom line, it pays to go after the obvious and easy plays.    In a bull market, every play will look extended and that's the way it's going to be.   This is the case with commodity plays right now.    We have to constantly remind ourselves that this is where the hot money is and this is where we want to trade.

..Rollover

If you came home last night and saw +42/+28 indices day, you'd think it was a ho-hum day.    What you missed was a head scratching +117 move to the upside and then a big rollover reminiscent of all the subprime intraday volatility as the market gave it all back and more before regrouping.    The reason it was head scratching was we really thought there was no major catalyst for such a move.     As it often happens, the herd jumps in and then asks questions, this time it was what are we doing at 12837 today?.     What comes next is a reason for profit taking as the market realizes it really shouldn't have made such a move.    A big rollover ensues while the market searches for reasons, yesterday it came up with some ABK and more writedown noise.    Any excuse is the markets motto.    To us it was not the noise that caused the big dipper, it was pure profit taking because you have a chance after an unrealistic move to the upside.      At the end , we held the 1372 area on the SPX and we remain in a position to move towards last weeks highs and that is all that matters.

We've been noting of how we are looking for a pullback in our commodity stocks and yesterday we had one of sorts, especially in the Ag-Chem's before a tide of earnings the next morning.. from POT, TNH, TRA, BG.     Was this enough?.     In our books the answer is simply NO.    We are not itching to get back in off a sell off into what is expected to be excellent earnings, it's the reaction following earnings that is important to watch.       What we mean is if a stock like POT falls 10-15 pts off profit taking before what will be a no brainer stellar report, we need to see what it will do next before making a move.     As of this morning what you see is so much of this groups move is being priced in following MOS, MON's reports earlier.     The problem now is the possibility all the optimistic shares see no short term upside and decide to sell and not be stalled.  If this happens,   we will be in a real pullback and that is what we'd probably wait for and only use todays bounce possibility for an intraday trade.     On the other hand, if this market wants to make a move higher, you know all these commodity sectors-stocks will be in the mix and we'd be buying back and forgetting the idea of any imminent pullback. 

Despite the barrage of earnings, there is nothing emerging this week of anything we'd want to chase.  Primarily this is not because earnings are disappointing, it is just because the recent rally is caking in any upside that earnings may bring to a stock. 

Considering AAPL did not give ammunition to the Bears overnight, we remain in a very opportunistic level on the indices heading into the final days of the week. 

To play or not to play?

..that is the question!.  Why?.   Well, things looked particularly interesting today, to say the least!    Market ended higher despite the notable weakness from the commodity sector.   Here's the thing, a strong market without the participation of any commodity play just looks deceptive to us, maybe this hit a few in the head too late as we came quite a bit off the highs.   Today's pop was led by financials and many financial plays on our list seemed to have broken out from their recent channel.    Other than a few selected tech plays, most of the plays we noticed just did not want to participate in today's mid day rally.     As far as tech plays go, MSFT's uninspiring report tonight may curb the recent tech enthusiasm some.   On the other hand, we've had enough inspiring reports from GOOG and the likes to really care about MSFT at this point.   The question so remains, do we trust this financial induced move and chase those plays higher?    To us, we'd be a little cautious chasing anything higher at this point going into next week's fed meeting, but with 13000 just around the corner many a short will probably not want to be too short into the weekend.   Therefore,  a short covering  induced move sometime Friday is not out of the question.

Commodity plays!   Lets face it, the past two days haven't been pretty for most of the commodity plays, especially today.    From as early as Monday, we had noticed some short term climatic action from many commodity plays and we said we're quite light as far as positions held are concerned.    The same trend continued for the following few days and we think we may see another day or two worth of profit taking.   Frankly, we think many of the commodity plays do need a necessary pullback as we've been harping in order to make this bull trend last longer.    Can this be the beginning of an end for some of these commodity plays?    It's possible, anything is possible,  but we think it's not likely.    This again feels like just profit taking and it's normal consolidation.    However, we should point out that when these commodity plays correct, they do correct in a fast and furious manner as witnessed this morning.     Considering the magnitude of the drop off the open, we were considering to dip in some, but then decided to give it at least another day to see if there's going to be turn around the corner.     The trick to play these commodity plays is that we don't need to get in at the absolute short term bottom, we just need to make sure that we catch on the up turn when it comes.  Save the head fakes for the a sport or two.

Coals, this is the area we are keeping our eyes on the most next day or two to move first into.   Other than that, we'd simply give other commodity plays some time to work their way out.    One thing is for sure, this market often has its ways to deceive you.   We really have to pay attention to what's going with the action of our plays to gain any trustful insights.

We'll update our watchlist, some notable charts this weekend to go with the DJIM weekend Journal edition.   Have a good weekend! 

DJIM #17 2008

Before the start of trading Friday, we headlined the Journal, "To play or not to play?"...it is pretty obvious which way we turned before the market ever did as we fired off alerts on BDX, MEE, IPI and MTL.    Basically, we went back to the well of what has brought us here near 13000 on the DJIA, this being primarily a Ag-Chem, coal and steel stocks.    So for the 2nd straight day, the market put in a nice reversal and that must've been very disheartening to the Bears heading into the weekend.    This signals a healthy market working its way up.    Unfortunately, some exuberance over the '13000' maybe curbed as we all start looking to hump day Wednesday and the FED move.   As we all know trading before a FED decision is not the most exciting thing out there, but this time at least we have 13000 in reach and the market will probably push towards that psychological level before the decision.    If we get this trade, we will use it to bring down our positions, simply sell into it.    That is the simple message here to start the week and really the only one for now. 

We have some interesting earnings this week, most notably FSLR and X to watch over.

We Wait...

There was simply not much of news flow two days before the Fed meeting.    We'd have to admit that market has done a pretty good job just drifting around the same level.    Today's a day we choose not to do a whole lot.     In AH, we had Visa reported number that is not liked too much by traders.   Perhaps, the stock has ran up just too much ahead of this report.    Coupled with many stock initiations on Visa today, it basically smelled "sell on news" right up until the report hits.  MA is today and we'll be eyeing this report as we do every Q.

The exception to our relative quiet trading day was SOHU.   This familiar internet stock came out what we thought was a blockbuster report and guidance.    This is also in the same theme of recent reports from the likes of GOOG and BIDU.    However, when we compare the report of SOHU with those of the other two, we just found it to be much better on a relative basis.    Given the valuation of the other two, it is a no brainer that we think SOHU can go higher, as long as the internet group is relatively intact.    Sohu website is also the official website for the 2008 Olympics and this can also have another spin to it leading to the summer event.     In any case, when you look at its report, guidance, momentum, float, relative valuation and Olympic exposure, there's really nothing to dislike.     We just couldn't wait for any pullback today and bought a position even after a 10% gap up.    We'd use any weakness to add more shares and we'd keep this one as a core play from now on.

As far as the rest of the market, there's mixed signal from various sector and the best we can do is describe this action as consolidation.     Some sectors are always more volatile than others as we witnessed some extreme volatility from the Agri group due to downgrades.     We aren't concerned about the volatility in the commodity area as the higher they go, the more volatile they get, naturally.     Basically, we just have to accept it as part of the play and firmly stick to the big picture when approaching them.

On Wednesday, we also have the GDP number which can also affect the market sentiment and we'll keep a close eye on it.    Until the Fed meeting, we are likely not to trade too much other than juggling a few position to a comfortable level.

...April Shower?

On this last day of the month,  the market is set up for either an April shower or a blooming May flower to be it seems!.  It's that simple as once again we are at the mercy of a FED decision and to make it even more interesting a GDP number before.    As usual the days before a FED decision provide lacklustre, choppy tight trading as traders become hesitant to make any volume moves.    Today will be one interesting day, but of course as often happens something else is on the horizon to fuel more speculation and that is the Friday job report!.    Ahh, it never stops, does it?.      So, basically if you are constantly defensive and weary of all economic data, you might as well never trade in this environment the last year!.   The most important aspect today may be the reaction of the USD after the FED decision.   The USD has been gaining some ground on the Euro/Yen and what we are witnessing is gains in the Dollar index are causing a retreat from the commodity/materials sectors.   Yesterday, we had oil down almost 3%, Gold off about 2.5%, Materials overall -3.1%.    There is a lot of noise that a stronger dollar will cause commodity stocks to fall further.   We think this is just that in the longer term..a whole lot of noise!. 

On the other side of the trade yesterday, it was only the credit card processors, MA and V that provided any kind of excitement.  Both companies beat handily their estimates, but it wasn't until MA reported a 30% beat that V's under 20% beat gained interest after getting beat down in the previous AH session.  Looks like we'll have another nice Q to trade these names.

The last 48 hours, we've seen a flurry of DJIM stocks announce earnings... some like MA V FLS CMP X and FSLR today are reporting great numbers, but what you are running into is something called 'expectations', in some cases unrealistic expectations.    This makes trading these at first sight difficult and what you should only be doing is going with the trend after indication it's all clear or you'll find yourself having a lunch with a CMP to the 50ema or worse.     If we didn't think these were powerful EPS companies, we would not have been playing them for months.   The point is getting ahead of the herd as we've done and let others worry about playing these stocks immediately off the next earnings.

Okay...here we go!.  Strap yourself in....or will this be just more unnecessary hype we've had to go through?

A relief...

Going into the Fed meeting, we noticed that there was a certain kind of anxiety among the market participants.   It was almost as if people were expecting some sort of surprise from the Fed policy.   Instead, we got about as neutral of a Fed policy as you can get.    Everything is expected from this Fed policy statement and nothing more, nothing less.   This is the first relief.    The second relief on the day is the kiss of 13000 on Dow.    You can say that hitting 13000 is inevitable and no big deal.    To many, they just have to see it to be relieved, sort of.    What followed the Fed announcement was a quick trip to Dow 13000 and then a reversal of the earlier gain to eventually close in negative territory.     So basically, with these two reliefs out of the way, we can finally get back into the trading business in the days, weeks ahead. 

Heading into the day, we had added some commods the day before, we got a very nice bump up in the morning and as we said going into the week, we'd be selling any positions before the Fed decision if we pushed closer to 13000.  The long commods', short the dollar players didn't get what they expected in the FED statement to reverse that play.   In case this was to materialize, we sold out ahead and it seemed many did as well as the commods' reversed down shortly after.     Now that we have the Fed thing out of the way, we can think of looking for entries again.     What do we expect to happen from this market the next few weeks?   We expect alot of drifting with no meaningful move from either direction.     However, a market in drift mode does not mean that there isn't opportunities to trade.    Keep in mind, even if the market goes in drift mode, we can still expect a swing of several hundred points in either direction on a weekly basis.    This is unfortunately the nature of this market nowadays where big market swings can happen in a blink of an eye, relatively speaking.

Judging by some stock action lately, we are going to summarize some as follows.

Earning winners are still being rewarded and this is especially important for DJIM strategy.   We like the story/earnings of MA/V and think the pair is a very good barometer of market sentiment.    Of course, we wouldn't want to chase them at this point, but we'd rather get in on pullbacks.   Oil price isn't likely to fall below $100 any time soon with summer(strong demand) season coming up.    This will affect everything from solar plays, transportation, energy services and of course oil stocks.    When it comes to oil related plays, it's almost ALWAYS best to buy on weakness as oppose to chase on strength.   This is contrary to our strategy for playing small cap eps plays, but times have definitely changed and those plays are just not around.     As far as other commodity plays go, we are waiting for some of our plays/sectors to stabilize first.    A correction is still a correction, no matter how big or small.    Watch the CRX as we noted yesterday for this stabilization and potential bounce.  It looks as though coal stocks may have turned positive and we'd be keeping a close eye on plays like MEE, FDG etc.     We also continue to like shippers as they'd probably be played right into their earnings date.   Again, we'd prefer to buy on weakness.     We also like select tech companies which include most of the internet stocks as most earning reports suggest that they are somewhat "immune" to economic slowdown.     Basically, we are only playing the ones on our watchlist.

Bottom line, it felt we have reached the end of spring trading and summer trading is on its way.     Things will definitely get a little slower from now on and this is in fact an advantage to us because we will have more time to position ourselves.   We'll see what the remainder of the week brings, at this point we're not in a hurry to get back in size before the employment report and/or with the market digesting all of yesterdays events.

Dollar rally...

Perhaps, the real reason behind today's equity rally is the prospect of no more rate cuts from the Fed.   At least, this is the perception today and the ensuing rally in U.S. dollar further confirms that particular belief.    So, it took two tries to reclaim 13000 level this week.    This market sure has its own way to make a strong statement.    Based on today's performance, is it time to go fully back into the market assuming a major rally is on the way?    Although it's possible, we are still skeptical a major rally can happen in the month of May.    Historically, this is when things slow down for the market and some participants go away for a nice and long vacation.     Does the market want to send a different message this time?   Maybe!   While we wouldn't just to sit there and not participate in this fun loving action packed up day, yet we wouldn't want to get carried away either and thinking we can party like 1999.    This is after all, the year of major turmoil.

The trading plan is simple for us.   We take a notice of where the money is flowing and extrapolate the potential time frame this phenomenon will last.    We put some of the names with good momentum onto the watchlist and trade them.     Our watchlist, in fact, hasn't really expanded that much lately but we will add a couple more to compliment our playlist.    As we pointed out the last few days, the commodity plays are going through a major correction right now and correction pace is fortunately, fast!   What this means is that if the correction is fast and furious, the correction will more than likely to run its course sooner than later.    Basically, we are NOT removing any of our favourite commodity plays from our watchlist as we think the commodity sector is still an integral part of our trading strategy for this year.     Inflation is not merely a theory, it is a threat to the global economy.   In our opinion, the inflation will get worse before get better.    We noticed toward the end that some of the Agri/Chem stocks seemed to come all the way from day low and closed near the high of the day.    This doesn't guarantee that the short term bottom is in place but we are willing to take a small position in names like MOS, POT for a trade with tight stops.     In terms of area that is working last few days, we obviously have the super techs and financials and a couple earning plays that are making new 52 week highs. 

On the tech front, SOHU behaved really well after its earning report and it notched a new 52 week high.    We think Internet sector is a strong area and we are playing very aggressive when it comes to dips.   The emerging market is also heating up recently and we've taken a liking in some etf such as EWZ and FXI.   

Tomorrow we have a job report to show for and we think the reaction will be somewhat muted regardless of the report.    The attention this week is very much on the Fed policy statement as well as the Dollar strength and commodity weakness.    If we get sold off on the job report, it is nothing more than old fashioned profit taking we'd be looking at some dip opportunity to get our hands on.

DJIM primary shadowlist

Our platform list at close Friday,

Symbol  News  Last Price  Chg (Prev Close)  %Chg (Prev Close)  Volume   Low  
     
AAPL          181.08      +1.08             +0.60              35,931,400   178.55  
AKS           65.72       +2.79             +4.43              2,719,400    62.73   
AXYS          56.20       +0.96             +1.75              203,200      55.49   
BDX           88.27       -0.97             -1.09              977,300      87.94   
BIDU          362.00      -8.00             -2.16              4,117,500    357.60  
BZP           21.65       +1.89             +9.56              1,300,700    19.78   
CF            135.12      +3.08             +2.33              1,860,300    131.18  
CLF           159.96      +5.15             +3.33              2,142,700    153.85    
CMP           66.40       +2.80             +4.40              738,100      63.86   
CTRP          67.87       +2.82             +4.34              1,426,000    66.03   
DRYS          90.75       +7.54             +9.06              5,310,500    84.50   
EDU           75.73       -0.31             -0.41              318,900      75.13   
EOG           127.22      +0.37             +0.29              2,975,400    123.92  
EXM           43.23       +3.17             +7.91              1,450,900    40.50   
FDG           63.50       +2.73             +4.49              1,318,600    60.78   
FLS           123.57      +1.49             +1.22              677,000      121.77  
FSLR          277.50      +14.15            +5.37              4,754,900    266.70  
**FXI           164.00      +1.84             +1.13              4,882,600    162.45  
GS            200.27      +1.22             +0.61              9,437,500    198.00  
HES           106.34      +3.88             +3.79              3,905,800    103.51  
IPI           44.75       -0.33             -0.73              2,972,900    43.68   
**IWM           72.69       -0.06             -0.08              58,836,700   72.24   
JRCC          24.16       +2.48             +11.44             1,095,200    21.67   
JST           38.91       +1.09             +2.88              83,200       38.00   
**KOL           45.23       +2.11             +4.89              197,500      43.01      
LNN           100.65      -3.09             -2.98              468,700      99.81   
LUFK          74.99       +0.65             +0.87              144,600      74.81   
MA            285.50      -8.44             -2.87              4,470,400    281.85  
MEE           52.81       +1.77             +3.47              1,769,300    51.32   
MELI          50.25       0.00              +0.00              554,100      49.80   
MER           52.72       +0.33             +0.63              20,350,600   52.08   
MON           114.51      +0.85             +0.75              7,392,500    111.72  
MOS           124.90      +2.35             +1.92              6,247,600    120.15     
MTL           145.36      +7.51             +5.45              1,172,300    137.44  
NS            53.45       +0.43             +0.81              138,300      53.16   
PCLN          126.37      -1.86             -1.45              1,621,600    122.87  
PCX           68.02       +2.76             +4.23              275,100      64.49   
POT           186.94      +3.78             +2.06              12,151,800   184.64  
RIG           151.71      +5.95             +4.08              5,817,400    146.50  
RIMM          132.52      +4.52             +3.53              18,962,400   129.48  
SCHN          87.79       +1.39             +1.61              508,100      86.13   
SOHU          77.89       +2.45             +3.25              3,110,300    75.00   
SOL           16.00       +0.38             +2.43              981,100      15.85   
**SPY           141.65      +0.53             +0.38              181,585,500  140.56  
TBSI          44.25       +1.58             +3.70              697,900      42.29   
V             82.95       -2.45             -2.87              34,162,100   81.00   
WLT           72.95       +5.24             +7.74              4,146,500    66.13   
X             157.06      +5.40             +3.56              4,373,600    151.24  

** denotes ETF