DJIM #31 2009
Monday, August 3, 2009 at 06:28AM
Demi/ YourPersonalTrader in FIRE

Every trading cliché in regards to ..'go away in May' and 'summer doldrums' has been thrown away in 2009.  But considering, we’ve gone through extraordinary times to the downside starting in late ‘07, we shouldn’t be surprised that none of the past cliches have held to form as we enter the month of August. We concluded July by painting a Bullish outside month of 869 on the monthly chart and we should try and break 1k early next week just because of this fact.   At DJIM, we had a successful July calling 2 breakouts, one was the break of 884 ES to start the rip and one last week to take out the Bears last line of defence this summer at 956 to come arms length of SPX1K.   Now entering August, we feel most of the work on the broad indices may have been done ST,  maybe one more push and break of SPX 1k like we said Friday to ..say to 1014 as 1st possible R before a market reversal.   In our view, the SPX is setting up to blow off some of the premium steam  after it breaks 1k into the employment report week.   Before or after the report, a good or bad report is probably going to be irrelevant.  It’s just going to happen we think.  

Considering, we’re not invested in high beta names now, like commods, casinos, we aren’t going to be too worried if a ST top occurs or if the market just motors up because we’ll be should fine with stocks we are closely following and trading. 

EPS stocks like FIRE  initiated on Friday, it jumped another 5% after posted and naturally settled on some profit taking after a 2 day run by close.

As we’ve noted in Journal recently,  we don’t plan on occupying a level over SPX 1000 for too long this summer, we prefer to make a strong bid to occupy the 1000++ for good in the latter part of the year when a powerful growth spurt will finally be evident to all, including those who are still Bears now.  We think rotation into and leadership will be from the Banks-Brokers later in the year to signal the next move.   This 1000 level is pretty well priced when you take in consideration a stronger than expected EPS season so far as a reasonable multiple.    It is hard to imagine a late summer-early fall overshoot, but these are not normal times and upside risk remains for anyone not participating or on the wrong side of the trade so far.   Fortunately, we don’t have to worry about all this,  life just goes on as we’re about picking stocks and we just need a few like STEC, DDRX from last Q this Q to trade for the next month or two.   So, as we enter August, we’re not in a position of Performance anxiety like many out there and can almost relax after being on the right side of the trade for months now.   We think the upside is limited here ST for the broad market in August, but not for individual plays as we enter the July Q end earning reports that kick off with CSCO on Wednesday night.   As we’ve been saying recently, we favor small caps over big gaps as a general tone for the market going forward and this plays right into our DJIM niche, if right.   The premium is pretty well used up now for the broad market, but this premium is probably going to be there for the taking as the mid-small caps reports continue to flow in August.

 

Article originally appeared on Your Personal Trader (http://www.yourpersonaltrader.com/).
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