DJIM #24 2007

In Sopranospeak, FUHGEDDABOUTIT! was the markets message Friday.  Unfortunatley, it won't be so easy going forward.  The rally defintely has felt true pressure and last week has fueled the bears.  What spawned the rally we've experienced for months was rehashed as earning (NSM) and M&A (X) activity were again two of the catalysts the spurred the recovery rally Friday. Oil helped and CNBC feeling the uproar from their audience got Gross to appear to elaborate, more like clarify on the headline they spewed Thursday afternoon.  All this closed out one wild week and if you took a chill pill Thursday night with us before drawing any drastic conclusions, you had no need to empty your book before the weekend.  What the recovery rally provided is it drew a line in the sand.   The lows on the major indices Friday will be the area to watch for many.  If we break this area, we will become very cautious of a secondary correction.   If this area is kept away from, we should be able to trade accordingly. One thing though is earning season is over and that major market catalyst is removed for the time being.  Can the market continue on with M&A activity pushing it till next earning Q.  We've got about 3-4 weeks to find out and we will trade in smaller sizes until, especially if playing this Q's DJIM names.   You want to be in size at the beginning of a potential earning move eg CROX, FWLT.  The first leg you could say.  At this point there is no way we would play these in the same sizes as before, we prefer to wait for a new crop and by that time we will know exactly where the market stands!. So for now we'll remain cautious and go with a manageable book.  Not too many positions and not oversized.  If this was a sign of volatility for the summer of 100+/-30+/- pts days, we'd prefer it to the laziness we often start to see at this time of the year.

Even after the tumultuous week there are more than a few DJIM's still trading near highs or making them. These are the stocks we are concentrating on. The partial theme here is to always play strong stocks!. Common sense says a stock that survived last week and finished near highs is a strong stock...common sense also tells you if the market starts showing signs of slipping again, these probably won't stay strong much longer.  Unless fertilizer is the next black gold!...A few of those are...

KMGB LXU TNH are all chemical stocks in one way or another, all showed strength before the rally clicked and so we were buying them again as the market gained strength. KMGB made it to the #40's in IBD this weekend.

CUB CROX RCCC NTLS MFLO still trade 9ema or above, very little damage sustained over the week.  Again 9ema is an area of short term support for most of the stocks we cover. We want to hold stocks above it, not below it!.

LPHI, GHM are fresh names (3-5 days off gap earnings) and of course are trading above 9ema.   

MA got some good news and might recapture the 9ema quickly from it.  FWLT did that Friday, but barely.

ATLS, if sec turns this could be ready to bounce off 9ema level.  AHD, holding up well.  

The shippers got whacked and we'll likely just watch them for now.