DJIM #42 2007

Here we are DJIM clan, the week we've been all anticipating as the tech giants start reporting...INTC, YHOO, EBAY, IBM, GOOG to give this market its course.  Somebody(s) wanted to start early Friday by showing that Thursday's beating was nothing but a mirage as noted in the last lines of the morning Journal.."Tech stuff this am..ORCL M & A news,   AAPL tgt raised by MS,     IBM estimates raised by JPM before next weeks report...as if yesterday's tech wreck didn't happen;)'.     This was was followed with Oppe' giving GOOG a $700 tag.     Aren't these guys off Fridays?.      Guess with a Blackberry you could shoot off a price tgt increase/ upgrade from anywhere these days.      Coincidence of all these coming out on what is usually a quiet Friday scene,  plus M & A activity tossed in?.       Doubt it, these firms are seemingly gonna do whatever they can to grease this market higher it seems,   maybe we're being set up for a final push into the end of '07..a push that could leave us all hiding in the bush for a while when this all ends.  lol.      Anyways...all we could do is take it one day at a time here and therefore we are all playing it smart....right?.     Without panicking on Thursday, we noted in the last half hour to let this market drain, "the market will still be there tomorrow and the noise will settle'.     We were asked by a few of you to give our interpretation of the steep and quick turnaround from the techs and that is what we did before the open the next day..     Well...it actually started with our AH Alert on BIDU and the BS surrounding the JPM report on it and the match it was on the box leading to the tech's fall.    Maybe the big boys wanted a fire sale just before earnings this week just to load up, maybe that's why the barrage of activity from them on these names premarket the next day.      If you weren't taking profits Thursday, well then you probably made up your paper losses by holding through the night.     Maybe you even added more as the bus got gased and you added to your positions into what turned out to be potentially a very profitable trading day.   Hell...just if you got on the BIDU bus once or twice it would have been nice.   We're not Cramer with a $500 push for BIDU late in the day, we don't care what is does today or tomorrow, all we try to do is give an early lead on a stock and maybe if you agree and see the ducks line up as they did with tech upgrades, then you will shadow us into the play.   Okay... We need to put last week behind us now as the EPS story starts to unfold,  but there are few quick stocks to note off the close last week...

CETV, looked sweet as it broke through the congestion noted at our $98 alert.     It had a nice afternoon as buying picked up and it closed at $104 mark.    You couldn't ask for a better chart on the daily and weekly leading up into earnings for this stock or any stock.   You might recall when the market was taking a beating, we discussed the potential of money flow into Chinese, Russian stocks, half of the BRIC.    On Friday, our GLDN reached another high off our last alert on it at $82 to $89's and it is taking the other Ruskies with it... VIP and MBT have reached new heights as well.      Another one followed here closely all the time because of its volatility and ability to shoot a moon shot intraday is WBD, the Russian dairy/beverage co.    It  had a beauty of a walk up Friday as you could see by the intraday chart.  This one could give it up just as quick always remember,  but the way it was ladder walked for 5 hours makes you wonder what's up.     It never trades so orderly.   Just like the Chinese stocks, we are continuing to favor this Euro flavor.

Speaking of the Asian stocks, if you look at the charts from this weekend, you'll see the potential resistance on the HANG at 29,000.   Have you seen the overnights?.    Unbelievable, these markets have no respect for any resistance, any potential top.  It just did a drive by and gave this 29,000 the finger!.  So what does mean?.  Well,   just potentially another day to trade our DJIM names.   There is a name that has crept up the last 2 days and has offered a whole lot of gain % potential.    If you didn't catch it Thursday, maybe you caught it on Friday and if it rides the train further off 2 consecutive volume days...well then we might get a 3rd day of opportunity.    Again, this HSWI falls into the speculative and does come with a warning, even though it looks to have some of the volatility subsiding and something might be cooking as its under accumulation it seems.   Icahn, making lots of headlines recently. EJ traded stupidly at first too.   Not saying its a EJ,  just how it traded in its first weeks when you had no clue which direction it would go on any given day.

EDU, a few nice points off the note on it in alerts Friday midday and going on the limb here at first glance over the report and saying this is a great report this morning!.   Still...remember let the market show you the way and if they agree with us, the bus will move and you will consider jumping on.   Why does this look good?.   Besides the headline numbers of beating by .12c  (91mln vs. a lofty 79c)55% growth YOY, 81 mln in revenues beats 72mln and is 42% growth YOY.   The kicker is a very nice 30% enrollment growth and 40%+ operating margins.      Sales growth of 42% and 30% enrollment means efficiency and power.    In our opinion, this is the barometer (enrollment)with operating/ gross margins that you judge this stock on!.   Hey, we went on the limb early with WBD recently off earnings and it payed off big quickly..lets try again.   Yes, this baby China was once $20 dollars here, she's all grown up and kicking on all cylinders.   Still...there is a CC to follow premkt.   Let the market show you the way.   It would be rude to have sell the news in this report, but who knows..lol. Good to have the Asian markets possibly lead this as well. 

We did a lot of selling into strength last week as we prepare to have cash readily available to barrel in on new plays arising from earnings reports. This is something we always preach here as we settle into another earnings season.   Have cash on hand!.   For some of you it might be a problem cause you've become infatuated with a big gainer such as DRYS, TBSI etc over the months.    Just remember, she can always dump you first from the lofty perch you have her sitting on.  There is a big derivative market here placing bets in the Shipping industry, you're with the Hedgies here big time and it will probably get more volatile as time passes.    At least consider lightening up some of your recent big winners into EPS season.    We've provided a look recently in the Journals as to the things to watch and be aware of when considering a headline EPS number.    We don't doubt the Shippers and stuff will be in play, but we have worked them over and over here and hopefully it is now time to discover some new blood and start from the bottom and watch them climb, just like we did with all the DJIM Shippers, China, even Russian plays.  We want the easy play and that usually starts with getting in on play before the herd comes marching in, sometimes it takes days or weeks...sometimes just a few minutes.

Cheers' mates!

DJIM #42 2007

It's been a while since we had a week like the one we just experienced.   Some can argue that the sort of week we just had was due for a while.    The fact of the matter is, that prior to last week, we were actually notching new 52 week high from Naz and all time high from Dow.    Both oil and gold are at record highs and the U.S. dollar is at a record low against other major currencies.   There seems to be enough economical topics out there that can spark some endless discussion.   The bottom line question is, was the sell off last week justified and is there more sell off to come?    In terms of justification, yes and no!   Yes because market has become over extended in a very short time and selling off some would actually bring its pace to a healthier level.   No because other than the names that needed to be taken down, there's no reason for many growth oriented names to get taken down as well.    This is pretty much the effect of "collateral damage"!   When mood is set and things get rolling on the down side, technical support gets breached and it's just a matter of selling everything down.    Many traders, especially the short term ones we know are programmed to sell into a sell off, as oppose to what the contrarians would do.     Since short term traders' majority holdings are from the growth and momentum side, it isn't surprising most of our favourite plays on the watchlist get taken down, severely.    Last, many of us are programmed to stand on the sideline when it comes to a severe sell off like Friday, which means no bids.

So what is the strategy of DJIM traders here?   Just like every other severe sell off we've faced in the past, we stand on the side and wait  for signs of a turn around.     We are still early into this earning season and there are many many big reports that have yet to be released that can turn this market around in a hurry.    From what we have seen so far, majority of the technology and growth oriented companies have reported good earnings.   In any case, we want to see some stability in this market to absorb any more credit crunch related news.  Let it be a concern and let it be the wall of worry.   We haven't hit November yet and that is usually when many of our small caps release their earning.    The bottom line is, that if a sell off is going to come to cool off this market, it might as well be this time of the year.     If you got caught off guard and took some hits last week, make sure those hits get dealt with asap.   The last thing you want is having some losing positions that not only get to you mentally and emotionally, but also inhibit you from making good on the next trading opportunities.

Assault

End of last week we discussed the weekend coming and the possibility of headlines giving the market a short term direction.  Good or bad, just to get things going a bit.  Well, we got a bunch of headlines Monday morning and none of them were good for the bull.   Yesterday, seemed like a slow orderly death as the GS downgrade of Citigroup, the delinquencies in auto loans at GMAC, the Chinese curbing lending, some ugly retail numbers played havoc, leading to an assault on the very important technical levels, the DJIA 13000 and the SPX 1440-50 levels.   Seemingly all wanted to get out before the holiday and possibly start fresh next week, this was most visible in any high beta stock carrying more risk.   You might argue the big money is away this week and they won't burn the turkey while away, but in the age of the computerized black box trading it doesn't take much to leave the switch on and many are set to go off as these levels on the indices are assaulted on.   We just don't know exactly where and we don't want to find out being long.  So, despite the very oversold conditions once again like last week, we are very cautious in stepping a foot in this market.   It is best to wait it out here and if the FED minutes or its specualtion give reason to bounce, well then we will bounce and flip a few stocks into the close.  But...as far as holding stocks overnight and continuously waking up to gap downs is out of the question now.  The pre-open negatives are rampant and it is hard to imagine waking to any good news at this point.  You might catch a nice trade intraday these days and decide to hold for some follow through the next day...unfortunately, it is not happening and you end up trading from your heels.   It's very easy to fall on your butt from this position as all it takes is one nudge...one or two sellers who will get out at any cost and the lack of bidders will do the trick in many of the plays we liked around here.  You simply cannot trade on the defensive and be successful.  If you have that defensive and/or worry feel in a stock, it is best to get out.   The seasonal bias is on the bull side come late this week, hopefully we can just recover some on the indices (getting over Thursdays/Fridays lows would be a start) and set up for early next when the big bull money might come to play this corrective slaughter.....if there is any left!.   We'd prefer to see it that way, instead of bouncing hard this week on very average volume and the Bears coming back and saying it was only on low/average volume.  They'd have a point!.

Holding Still...

This market just doesn't want to go into easy mode these days.   Despite the fact we are in a holiday trading week, both the volume and volatility of this market are right up there among the higher days we've seen.     Of course, there's one and a half days left in the week and we have to literally laugh off any potential heavy action that's yet to come.    Today's action is definitely better than yesterday's and bulls held their ground from last week's low.    Although we are encouraged by market's late day action and particularly action from some of the high profile tech companies, unfortunately the action isn't spread evenly among all the names on our watchlist.

Shippers, this group just can't seem to get a bid whether market has a rebound or not.    We are definitely staying away from this group and unless something really dramatic happens with the sector, we aren't likely to play this group for a while.

Solars, since most if not all of the names in the group have released their earnings already, we don't think there's that much to look forward to in the short term.    It's troubling to see that none of the solar names wanted to participate in today's late day rally.   There were also numerous upgrades on various solar names last little while which didn't seem to help to lift the group at all.    However, if we get a meaningful rally from the crude oil, this sector will definitely get some action again.      Until then, we'd stay on the sideline for the most part unless a good intraday opportunity comes up.

China Plays, we have just one last reminder.   Just because some of the stories were so good a month ago doesn't mean people are still paying attention to them.    The group's currently in what we call a "diseased" mode and last thing we wanna be doing with them is to play a rebound.   Untill both the Heng, the Shang and major Chinese ADRs here all get some good action going, we'd stay away from the group completely.

 Right now, we are doing exactly what most others are doing and that is sitting on our hands for the most part.    The further away this market moves from last week's low, the more inclined we are to get back into this market.   For now, we are just playing some intraday points from the likes of RIMM AAPL GS etc.

...cold Turkey...cold Bull.

Maybe sitting around a table with family and friends ...getting stuffed, laughing, watching the Pack' attack yesterday brings some sensibility that it's not the end of the world and that this market is not at the end of its rope.   Just like Brett Favre being written off, this market can rebound too and show some of the same grit and determination.  Right now, we are overdone for the short term and the shorts might be thinking of a snapback more than the longs.  You can see this in how fast a short covering comes and moves the market up.  We saw this on Tuesday.  The confidence is just not there with the longs in the past week, you know the amusement park game where you smash constantly the popping beaver...rabbit or whatever it is with a mallet as they keep popping out of holes.   Well, that's what the market feels like and plays like, except its Bulls ..and every time they get an uptick during the day and show their horns....they are hammered back down.    Soon the Bears arms will get tired and we'll get a reversal of sorts, nothing goes straight down, especially with earnings growth still around.   In the meantime, intraday traders should be selective and those with a longer hold period should just stay on the sideline until a march up the field takes place.   You don't want to start at your own 20 yard line, wait for a few first downs from the Bulls before coming back into the game.

Happy Holidays..

DJIM #47, 2007

How time has gone by so quickly these days!    We are near the end of November in one of the most turbulent year for as long as we can remember.    First of all, we'd like to hope everyone just had a really relaxing and joyful thanksgiving holiday.    For now, we need to rest as much as we can to prepare for the coming events.    This week is marked by a pretty strong finish from all  indices.    Unfortunately, to most of us, the week really finished on Wednesday, where a barrage of selling that took our indices below the August's lowest closing point.      So does this Friday's half day trading mean anything to us?    Yes and No!    It means something because we know now that there's at least bargain hunters out there willing to take their chance and put some capital into work.    It also doesn't mean much because if coming Monday this market resumes intense selling, the action on Friday would look rather like a joke.

The big question here is that if we are going to see more severe selling next week, when the majority of the market participants come back to their trading desk.    As oversold as the market is, it can still go lower before we see a meaningful bounce.     Yes, a meaningful bounce, and that is something we have not seen from this particular sell off.    On Friday we had some encouraging retail data(Black Friday) which gives us some assurance that at least the consumers are spending.    All we are hoping for is that the market participants would take it into their trading consideration and that would likely give a boost to retail sector(another battered one) and consumer electronics including gadget makers etc.   Hopefully, we just need to take some attention away from the current financial woe.    This may be a lot to ask for but we think the timing of the retail data coupled with the severe oversold condition, it's not unrealistic to see a bounce out of this.

Our game plan is simple...  if coming Monday this market continued where it left off on Wednesday, then we'd obviously sit patiently for something to develop.    If we get a good follow through from Friday, we'd likely be start looking at some plays including everybody else' favourite like RIMM AAPL, solars and anything that's relatively close to their year high.

Bottom line here is that this is a very tough market we are dealing with and we have to fully appreciate the magnitude of it.   Right now, it's not about making more money than others, but rather not to lose as much as others.    Whether a bounce comes in days or weeks, it will come and that's that.    If a bounce somehow turns into a rally and all the bad news get absorbed on the way, then we'd be fully committed capital wise.   Until that day comes, we'd be in a total survival mode now.    As long as we all understand what's going on, we have a pretty good feeling that we are all going to get through this.

Pivot

You need a good a pivot foot to drive to the basket and this market has its laces all loose and tangled and keeps falling on its face as it attempts to take a step forward.   Yesterday was a disappointment and it was set in motion by a few firms laughing off the holiday shopping.  Guess all their junior analysts walking through malls saw something different than the numbers put out that got some thinking positively.  The action just proves that if you are thinking of going in on a somewhat longer term trade, it is better to wait for a few first downs to see if the market can hold on to the ball if it starts to march up the field.   Yesterday, after the first 1st down on the Friday the market was sacked 15 yards back into the red zone.  This being the 12800 yard stick on the DJIA.   Well, just following this close while all the Bears began the Bear chant of recession, Bear cycle again, Citigroup announces an expensive capital raise of 7.5 gazillion dollars to Abu Dhabi Investment authority. This capital infusion and the CEO commitment to maintaining the dividend and not cut could restore some confidence in this issue and help other financials.  No promises.  We're not going anywhere unless the financials start to rebound.  'Maybe' this news gets us back over12800 to start.  It's not much in the big picture, but this market needs all the help it can get at this point.   As we said in chart section this weekend this area might be riskier than all the ones before that were broken.

We haven't mentioned a stock here on the Journal for about a week now.  It is best we don't give any ideas to those that are not more than intraday traders at this time.  Just too dangerous.  There are a few stocks that are providing some trading opportunities, but unless you can have eye(s) on the screens throughout the day, you might as well continue to get splinters on the bench.  Even...below is a case and point in one stock that was acting well against all the odds lately.

Just a trading note...a general rule for us is to rid of stocks getting a negative headline immediately.  Sometimes this is an offering or whatever and deal with it after.   But it is essential to get out the door early.   This brings us to BIDZ yesterday.  Most of us here know that rule applies to Stocklemon reports on a greater scale.   Usually they go after stocks we've traded generously to the upside and therefore these stocks have lots to give up fast and usually do after a report is published.   A members note on the forum yesterday, hopefully saved those playing BIDZ some 5 or more points.

..A November to remember....

..or more like a month to forget!. Forgetting is good, but we all should take a lesson or three out of it and use them to become better traders/investors in the future. On this last day of trading in November, we have some bullish action to lead us into December.  Yesterday's action was quite surprising after two days of big gains on the indices.  Not only did we have back to back huge bull days, but yesterday the market showed great determination and grit in fighting off any profit taking finishing slightly in the green.  It is doubtful many expected so little volatility, mostly the Bears who already started yelling the day before that the 'fix' is in to have a rally into the end of the year. The action was very encouraging if not affirming the belief we can rally in December...well, that is if no huge headlines come from the financials.  Maybe the big boys pack have a secret handshake in play and will save any more bad news till early 2008.  Let's hope!.  The other day we had hints of another interest rate hike, now comes one from the man himself.... Lets go for Day 4!..lol

Bernanke hints of further rate cuts - AP

AP reports Fed Chairman Ben Bernanke on Thursday hinted that another interest rate cut may be needed to bolster the economy. The worsening credit crunch, a deepening housing slump and rising energy prices probably will create some "headwinds for the consumer in the months ahead," he said. Bernanke said he expects consumer spending will continue to grow and suggested the country can withstand the current problems without falling into a recession. But he indicated that consumers could turn more cautious as they try to cope with all the stresses. The odds have grown that the country could enter a recession. A sharp cutback in consumer spending could send the economy into a tailspin. Against this backdrop, Fed policymakers will need to be "exceptionally alert and flexible," Bernanke said. That comment probably will be viewed as a sign the Fed may lower interest rates when it meets on Dec. 11. The economic outlook has been "importantly affected over the past month by renewed turbulence in financial markets, which has partially reversed the improvement that occurred in September and October," Bernanke said. "These developments have resulted in a further tightening in financial conditions, which has the potential to impose additional restraint on activity in housing markets and in other credit-sensitive sectors," he said. In his remarks, Bernanke said rising gasoline and heating oil prices as well as higher food costs have the potential to raise inflation. He said that is something the Fed also is watching.

As far as individual stock plays, the list from yesterday's Journal should be quite sufficient into todays trading.  Nothing has really changed except some names had big days, most notably a few of the Solars here... and the idea of watching DJIM China names for a new opportunity might have paid off for a few of you already if you entered early yesterday.

Still, We don't see a reason, especially after yesterday action in these names that momentum money going into the solars and back into the shippers won't spread to this beaten up bunch.

DJIM #48 2007

In typical Friday fashion, we were exposed to quite a bit of profit taking, except in this case it was probably more justified after the rally and another early move up Friday. The market ran on interest rate fever and now most likely it will trade sideways and consolidate till the FOMC decision on December 11th.  The FED will be watching the numbers closely this week and traders will be doing the same, some will position themselves for that date and others will just sit on the sidelines.  In our case, even though we think the bias is up, we will be picky and look for a few set ups and pockets of strength.  Possibly position in on some dips on some favorites.  Seems a few downgrades are making the rounds and you start to wonder if the firms might want to get some cheaper (eg RIMM downgraded a 2nd time in as many days).  The pockets could and usually are a sector, but with the gains last week in our 3 most closely followed (Solars, China, Shippers)we are not expecting great follow through on them.  The pockets this week could also be the big financials like GS, MER which are acting like daytrading stocks in this environment and also the interest rate sensitive group.   It could also be oil stocks if the prospects for the winter are any indication by what some are seeing of a long cold winter.  This would also most likely help the Solars.  So be patient this week, as we say the indices don't go straight down, but they also don't go straight up.  If the market did continue to rally this week, we'd be very concerned of a sell off on the FOMC decision no matter what it would be.   A week of sideways action might just be the best medicine.

Just like the good old days, there is some M&A activity for a Monday morning instead of the usual sub prime headlines. Unfortunately, it might have little affect on the the mood of the market early this week, it is probably better to get your XMAS shopping out of the way this week and get ready for pre-xmas trading...we'll see.  What we don't want under our trees is more negative headlines from the subprime debacle to kick the legs out from the market after the recovery last week.  Be patient, be selective...a stock like MELI might be a ticket, it surpisingly didn't particiapte to some degree in the retail/online push from last week, but this weekend was a feature in IBD.

Between now and next week...

There's going to be whole lot of consolidation for this market.    Granted, it's possible that this market can just shoot up again like last week.   The fact is, it takes a market ALOT longer to move up the same amount of points than it takes to move down.     The majority of the time in an upmarket, is spent in the consolidation mode. Just look at a daily chart of the indices for the year.    This time around, we are just glad and maybe a bit fortunate to be in the consolidation mode.      Right now, we are monitoring the financials closely as they may be the catalysts to pull the carpet from this market again.    The good thing is, that it would take some substantial negative news to get the financials to break the recent lows.      It's not an unlikely event but the odds are diminishing if Fed is on the move to help things out.    Market is currently pricing into a 25 basis cut but some are expecting more than that.    What we think is important from the Fed is its language going forward.    Giving less attention to the inflation while paying more attention to the current financial crisis from the Fed is what many market participants wanted.     We'll just have to see how it plays out a week from tomorrow.

Back to this market!   While some of the bigger tech names have been in the profit taking mode, many other plays on our screen showed resiliency.      Keep in mind, plays like AAPL RIMM have almost climbed back to the level before the sell off started.   Some profit taking in those names is understandable given the magnitude of the recovery of those stocks.    Solars, with the exception of FSLR (analyst day), held up really well today.    We can see the result from the speculative action of SOLF alone.     Many China plays held up as well.  LFT is in the initiation phase from the firms.

We are going to continue to see some pullbacks and consolidation from this market and we feel playing conservatively is the best thing to do before the Fed meeting.    Essentially, we want to see if this market can sustain its recent gains and build a base around here.    With a willing Fed and a batch of never ending negative news, we may be able to finish the year on a high note. 

Grinding...

Nobody likes consolidation, especially after a run-up and especially those traders that did not participate.  Simply, it's because they have money to use, it's money on the sidelines waiting for the next tick up.  Also, the traders that did play are antsy to get started up again.  The grinding action is aggravating, frustrating to watch for all but it is a necessary course and most importantly allows stocks to set up for the next kick up.  It is the time to do your homework, separating your potential winners from those that just went on the coattails of others. The next move up, if it happens, will not be of the same vigor and so many of the coattail stocks will probably not set up during this action now and /or participate when the time comes to do so.  The days leading into a FED decision are always quiet in nature as both sides set up or just sit on the sideline as we've said.  These days it just that more quiet as we go through turbulent times.   What this leads to is a game of give and take, in this case meaning trades are very quick in duration as they give a point or two and then take it away just as quick in a few hours or less.   It is not a time for those not watching the market on a full time basis to be entering into positions.  Many of you in this position have taken the right road since the morning Journal on November 8th when we wrote on the possibility of CSCO breaking the camels..donkeys back.  It happened, it broke and those with a longer time period than an hour or a day have been the lucky ones preserving their gains and cash while the rest of us grind in our accounts.  The days of 10 trading choices a day are long gone for the past month, you may get one now and it doesn't last that long. 

"Cash on Hand".  EPS winners are hardly recognized,  just look at the grinding action of a SIGM since earnings day.  It's a different ballgame now and everybody should get used to it until the Bull comes back.

Early last week, we focused on the China stocks and they continue to be the steady lot.  The gains are not huge but you should be happy to get anything on the long side these days.  The Shang/Hang had a good session, but now comes more word out of China shifting and tightening their monetary policy to prevent 'overheating'. This is nothing new, everyone will have a spin though. 

Solars, this used be one big happy family. Meaning when one moved, its brothers and sisters all went for a joyride. As we saw yesterday, this might not the be case now and makes trading this sector harder as it's not so cut and dry.   FLSR had a terrible day, STP was down nicely, while SPWR provided a prime example of what you could do with a intraday day, but serves no purpose for those not able to sit and watch the market all day as it climbed to 133, 5pts off open and almost 10 points off early lows.  On the other side, there is SOLF who seems to have looked in the mirror and saw JRJC, guess that says it all.   A hedgie or two gone wild taking a bunch of gung ho traders with them.

There is no expectation of new plays or earnings plays emerging in a corrective market as they did this summer, one after the other.  It's the nature of the beast.  It's also quiet logical.  This has been the case since early November.  It comes with the territory and you have to live with it, it's as simple as that until the trend changes.  In the meantime, you concentrate on what you know, your watchlist and trade around it and/or preserve your money.  This doesn't require intraday alerts/comments, we all should have our favorites by now from those traded here and know which ones you can trade without making a mess.