DJIM #49 2007

Tis the giving season and Tuesday afternoon,  we're gonna get some in the way of a FOMC rate cut.   Following Fridays data, a .25pt cut is the most likely outcome, but there are enough still in the .50pt camp.  One thing is for certain is the decision won't be unanimous as we'd all like and all eyes and ears will be fixed on the statement attached.  Unless there is a knockout grinch punch to the market in the language, we think the market will move forward and set it's course on continuing the recent rally into the holidays and New Year.   Basically,  just get this over with and lets move on the heels of last weeks bullish days as the indices finished near the weeks highs.  Last week many quality stocks continued to get out of their bases with many more bouncing off the 50MA with follow through days.   Also, recent quality earning stocks showed some life as quiet a few closely followed at DJIM broke to new highs during the week.    They include...

MA, ISRG, AAPL,  we have always preached set ups with NCH's in place or in sight.  The market started to provide these trading opportunities once again after a long lull as these leading stocks in the past regained their lofty positions.  That's the kind of action any growth investor or just any trader wants to see and trade. 

VIP, MBT, SIGM, WDC, PSEM are the other recent EPS stocks that reported very good numbers and are now being recognized and given spurts of buying leading to NCH's almost daily.   MBT and VIP have an overweight initiation out from Lehman this morning.

SOLARS, the picture was not so clear heading into Fridays trade, but as we noted there were a couple of buy upgrades on YGE and SPWR to possibly play a part ahead of the trading day.  These upgrades definitely fueled the solars up again as many had nice days, including JASO again and STP...FSLR ran up on rumors of a contract.  We've seen the firms 'lead' this sector forward before when they start with upgrades, initiations. We might have some of that starting up once again.

Our closely followed China stocks LFT, STV, WX, EJ, EDU snailed to a 2nd consecutive week of gains since we turned our focus back on them. The volatility seems to have been removed for the time being and we started to call this group of stocks a Mutual Fund as they creep slowly higher and higher.

After weeks of trying to find a decent play, the market has started to give us plays that fit our methodology, eg NCH's and we welcome it and will concentrate on the above sorts with the usual sector (solar, china, shippers) tossed in.  It is a time for all of us to look at the 52week high lists and find more names that might provide a good trade while they trade at these levels.  You will start to find many former DJIM site names thrown around in this crop of stocks as you do your nightly homework...BOOM FWLT FSTR GEF LIFC PTT RICK TXT VE WGOV etc.   You want to trade strength and get out of any bad habits you've found yourselves in trying to trade a corrective market, such as bounces etc.  This may really be the time once again,  if we clear tomorrows FOMC hurdle in one piece.

Pre Fed

Many are lead to believe that last couple of day's action is due to the anticipation of a Fed rate cut tomorrow.     We think it's a combination of many factors that are setting us up for some really good action in this month.    However, Fed is still Fed and anything they say tomorrow can have a dramatic impact on the course of this rally.      As far as we are concerned, as long as the Fed addresses the current financial environment we are in and it's willing to adjust its policy to help the market, we basically get a green light for the next few weeks.    If for some reason the market sells off the Fed news, and especially if it's some good news, we wouldn't be hesitate to buy into the dip. 

Now the playlist...

Over 90% of the stocks on our watchlist are green and we just have to be very encouraged by the market action today, but FOMC on deck!!.  We'll get into detail of some of the action here,

Solars,  this group has been on fire since the Energy bill.   If you miss the low of the group on Thursday, then Friday would've been just fine getting into some of the popular names.    Today we are getting some really good follow through on top of the good action from last Friday.   Our top favourites are now STP LDK JASO FSLR...  we are also trading SOLF CSIQ as well to throw in the mix.     

China Plays, we are actually surprised that some of the more speculative names are still holding up and showing signs of perkiness.   This leads us to believe that there's definitely more pop to come with the whole sector.    The quality ones we like had some mixed action today with STV WX outshining EJ LFT by a wide margin.     STV has a particularly nice breakout out of the recent consolidation off very good volume and we think it has potential to return to its former glory.    We are definitely trading more aggressively toward STV after today's action.   With LFT, the consolidation is still between $23.50 and $25 and it may require some more time to really break out of it clean.

EPS winners, MELI had a very nice breakout today on very healthy volume.  It notched a nch and sits well above the recent range.    We were really hoping for an intraday dip to buy some more but it just never came.   It looks like we may just have to chase it if we want to get some more of this.  SIGM MA VIP MBT continue to trade with this market.   One thing we have to remind people that the eps winners do trade in a rational manner so the further away they move from 9 ema, the more likely that they'd stall and pullback.    We simply have to be a little patient with the eps winners and have a bit longer term perspective.     

The bottom line, this market still feels unconvinced for a rally and many people are still underinvested.   Alot of negative news are being absorbed by this market recently and all these are all considered bullish sign.    We have LEH releasing earning this Thursday and that may give us a clue of how the financial world will react, which is very important to gauge the market sentiment.

..firmer

Despite what at times felt like a volatile day, it came on the expected diminishing holiday volume and therefore some intraday expected yo-yo swings occurred on the indices.  At the end, the action is firmer for the last 2 days and unless the down swings are on a bad headline with volume, it is best to stick it out with some positions and look forward to the XMAS shortened week and a possible rally of sorts.  A few things occuring the past few days are indicative of a whacked out market, this is best shown in the different reactions to GS strong earnings and MS's blow up.  But this could be good news.  Possibly the best thing is bad news from the financials may be getting priced in on some stocks and confidence is climbing that the firms are finally throwing everything out including the kitchen sink and coming clean.   Now only..if the market can shake the ugly numbers from BSC due out and we'll have a clearer picture as to where we are going.   It's confession time for all these boys.    We've attached the importance of earnings this week to possibly set or at least curtail the latest slide, last night Oracle reported a big quarter on all fronts. This includes getting it finally right on what is usually their very so-so Q year after year.  Is this a forward to what we may expect from more tech firms ahead or is it just a anomaly of sorts?.  It does bring a potential boost today to techs, but this might be short lived as RIMM reports AH.  Let's hope RIMM makes it back to back, other wise this Oracle number will be forgotten quickly.  In the meantime today,  FDX , BSC, ORCL can lead the way in 3 essential  areas to a very big day....let's wait and see.

LRN,  if you took your eye off K12 yesterday, you found a surprise on your next look as it probably jumped another $1 or more.  We said this might see high 20's if it just got some volume.  Guess what....it didn't need it as hit $30 and up almost 50% since we alerted the buy in the first hour of it's debut last week.  Only regret and you could blame the weak market last week is we didnt go crazy into it.             Ah..the great trader/investor motto...could've..should've..would've!.  lol..    A pullback would be great as its up 50% from its opening price, but it just might be getting discovered so its best to watch the volume as a pullback might not be so swift for your first entry or a re-entry.   We've taken most off the table and will look for the re-entry, in the meantime we dipped into APEI after it passed it's initiation day with a few nice buy targets.  You can only dip as this is trading lightly and has only a 4.5 mln float.   With all the messes out there lately, we think these educational online plays are under radar.   Actually, they are the perfect stocks for a holiday buying frenzy if the manipulators want to drive a stock or two higher next week as in years past.

WBD, another recent buy in alert after earnings. This followed what we outlined here the past week quite well, it did look right the day before at 121 in a market where nothing was looking right and it hurled $124 for another entry before ticking up to 130.  A nice run and it did hold up well, but as we've repeated over and over lately....take what a stock gives you and walk away. In this case it was more than enough.  We'll look for re-entry here as well.  The volume has not come in yet as it has in the past on runs and so we'll look for it with a break over yesterdays high levels.

MBT,  we've been spreading out our risk lately and this means using foreign ADR plays (VIP,WBD as well), in specific regions like Russia. MBT, looked very strong yesterday and it held its break of the recent channel top.  This one can move fast and we are eyeing it back to recent highs.

MA, really beaten up the last few days on the Euro ruling for months and months to come.  In the near term this should affect MA's profits as it does not cover the majority (over 90%)  of MA's volume. Ma should get back on track after all this noise is digested.

Solars,  LDK guided EPS in-line, a downgrade and what you might have is some pressure on solars.  We'd use any negative reaction spreading to take advantage of the dips in the usual suspects.  These plays are not going away by a longshot in the short term.