...in front of the Fed

Not surprising to see some profit taking in front of the FED yesterday, especially after a 6 day rebound from Oct 22 lows.   A surprise to some maybe was the late round of selling led by the "dry bulk rate", Chinese games taking down the momentum shipping group hard in the last hour or so.  A few other groups caught the coattails of the dump and sold off as well.   In reality, this was a non-event and all eyes and ears will be on the 2:15pm decision.  This was not a true reflection or a hint of what may come today.  

As far as the shippers, we haven't covered this group on the daily Journal since mid October, ..."This story ain't going away heading into the New Year as we've noted before, but after this latest binge momo run we are more cautious and prefer a pullback to go with a worthy position overnight.   Lets just say, we liked a TBSI more at $50 recently than at $60 now.".    Well.. we haven't missed much action since those words, except one sell off and rebound and now we definitely got a big pullback, but it is too early to say we are looking for an entry back into this group.    This group story isn't going away unless the Chinese don't need ships (if that's the case everything on the market is in trouble).  These are cat and mouse games to get rates down and it is something worth watching now if you are thinking of going long for more than a intra day trade.   When selling hits, it is always best to rid yourself of the stock and ask questions later such as to the reasoning.  You have some political games here now and you need to keep updated.    We don't have the time and will only react when the coast is clear.    Many firms recently raised this groups price targets and will be going on the defensive tomorrow, a bounce here and there should happen.      Nothing could have been more dangerous than trying to find a place to park your money as this group started to sink, looking for an entry and not knowing what is the cause is praying for some blind luck.  Just in the last 30 minutes EXM fell another 7 after giving up that much already.   The 9ema short term was crushed here and it is a second pullback late in the month, this one more extreme.    Hopefully, our constant warnings of this possibility hit home as this group was having yet another binge recently, included was the information given that their are large amounts of hedgies playing a derivative market here in this group.  A dangerous combination,  just waiting to Titanic.  This ain't no Mom and Pop selling yesterday, this was led and taken apart by the bigger money......We`ll let this cool off..

We are about to get a load of EPS reports from recent DJIM names in the next few days. (see earnings link).   Hopefully with a favourable FED reaction and some nice earning we can continue to go forward off this latest bounce.    There is really no use discussing what could be strong in the morning based on Tuesdays action as so much is riding on the reaction in the afternoon.    But a few notables yesterday heading into the morning trade are CETV into earning , EJ YGE BIDU were the Chinese stars on Tuesday and AAPL fit in with the tech sec having a good day.  A few remain near highs like SPWR should remain in play as well.    One thing to possibly watch for in the upcoming days is where is the momentum money flushed out of the shipping group is going to go.  It might sit on the sidelines if the FED reaction is muted or terrible, but if its not,  we'd closely watch the other momo groups such as the Chinese, Solars, IPO's to start with.

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.

..some calmness

Seems many gurus are writing off the market saying this latest liquidity plan is just for the big boyz to get out higher and fry us all.  Hell, many have predicting doom since summer or years for different crisis situations, but we just keep playing along with many of you as we have done so for 3-4-5 years.   We love conspiracy theories , but we don't trade them unless they are ours and we won't give up now thinking this market can trade up still.   Maybe , we are too simple and too simple in our methodology... We/You are not giving our neighbour a loan and they won't give us one and so the banks have the same situation.   They don't trust each other and so the liquidity plan comes to fruition.   Simple...  someone steps in and helps both sides.   We are in favor of this intervention and think this will help soothe out things eventually.   It's a start.   The last time anything close to this being done  on such a worldly scale was after 9-11.  That puts things into perspective in more than one sense.   The severity of it all now and the ability to fight back is there as we've seen before.    Day by day things will clear... if the market can't hold a13500 DJIA or NASD 2700 close in the short term, we'd start to worry more from a technical standpoint.   But...until then we are ready to jump on Santa's sleigh and go for a ride with a few of his helpers.     Well, the DJIA did hold 13500 (barely) and the NASD is still some 30 pts away, but we all know what 30 points is like and that's a half day of a run these days.    The way RIMM, AAPL BIDU performed makes it even more plausible soon and therefore an opportunity to strike these names up again will come.   We are encouraged by today's action, the lows of Wednesday were hardly touched on the indices and we worked higher into the close.  A little grit and determination was seen today and everything held together after yesterdays big intraday slide.  ' If ' we get a manipulated CPI number premarket, we could have an added ingredient for a move starting for next week.   We are getting to the biggest time of the year for manipulation as the volume will soon start to dry up.  This is the time for all the manipulators to step forward..big and small and boost year end totals on all boards.    Surely, a BIG lot(s) will be there to help out the market.  You help us out with liquidity....we'll help up you in other ways, guys!.. told you we love conspiracy theories, we just like'em on the bull side.

LRN,   K12, how cool a name is that!;).  Anything/anybody to help the kids from Kindergarten to grade 12 surf online other than us is a great concept!.  Okay, so its a little more than that as LRN offers a 'real' curriculum of educational services, lessons.    A virtual public skool alternative to supplement the kids education.  A recent educational IPO, APEI serving the military/law enforcement had a big run since it IPO'd as we noted with LRN today in the $22's.  It had nice full day trading to the $25's and we were trading/taking positions throughout the day.  A 6mln float makes it attractive to boot.

MELI, a long standing citizen here and a recent alert this week at $45 was making some people very happy last night as it traded to $58 AH's off Cramer.  It's only a recap if you are not trading it this week as it's held its ground near highs through all the volatility we've seen.  We have always liked to sell to an incoming herd from another source.

MA,  another long term play here and again highlighted a few times this week hit a NCH with a $224 close with a converted touchdown and field goal day..10pts. No yellow flags with this machine.

Solars, we highlighted this bunch into the trading day and it was really the only 'group' action going with FSLR, ESLR leading the way off the upgrades mentioned in the morning.  JASO, SOLF, YGE all held green as well and if we keep seeing this group up, STP, SPWR will join the ranks again.

MBT, VIP, after making NCH's recently they have tested 9ema and seem ready to resume if the market gives them a chance.   The telecom sector has been one of the leaders on bad days in the market and with Russia's political picture clearing up it should bode well for these ADR's soon enough.  These have always held up during the rocky days of November.    ROS,  a secondary play on the above when we started coverage back who knows when is a clear beneficiary as its practically a 'state owned co'.  The other two offer volume and so we'd continue playing with them.

RICK, so this is where all the bankers are striking up liquidity plans these days!..No wonder they have no $$$$.  This one just keeps on doing a slow dance up.

GXDX,  no big surprise the traders didn't show up the day after EPS.  We've outlined numerous times recently that small/ float EPS plays are not getting the love immediately as we have been used to in the past. The chasers are still not there as we saw today and since this stock had a very nice pre earnings run, its really not surprising to see profit taking come in.  Keep it up there on your potential playlist.  A pullback always balances your risk/reward out.

Oh yeah, RIGL,  wait till phase 3 comes out, it will go to $100..;).  The beauty of this action is there's crazy foolish money out there still to play feverishly and we like that.   Along with interest seen in the IPO LRN,  it gives us more hope in the coming weeks for plays as there is a willingness to put money to work.  It's sporadic now and sometimes doesn't last too long , but that could all change as spreads widen in more names when the volume starts to dry up into the New Year.

DJIM 50, 2007

As the year winds down with this upcoming last full week of trading, we find ourselves at the crossroads here.    We are here because there's definitely two distinct possibility in front of us.    One possibility is that we roll over from the recent gain and try to test the November low and who knows what happens after that.   The other possibility is that we stop going down right about here and churn our way upwards, in an apparent and somewhat violent manner.

Lets talk about what happened in the past week first.    The action from past week is purely centered around Fed decision and we can understand how market participants feel after the decision.  They have a hangover.  In our opinion, unless Fed surprised us in the optimistic way, this market would get sold off regardless because  as we had come off such a good 2 week rally from the November low.     In terms of Fed's decision, in our opinion, they are doing the right thing even though it may not be "instant market friendly" kind of decision.     The bottom line with the Fed is that we have the Fed on our side still.    They aren't being ignorant contrary to many people's thought and they are simply being patient to help out the financial crisis.   This of course isn't being bought by everyone because many wanted that "magical potion" from Fed that can solve all of the problems once and for all.    Believe it or not, many if not most of the problems associated within the financial sector still need to be addressed and resolved by the companies involved themselves.   In other words, market needs to do the most to bail themselves out.    This is only healthy in the long run.

Too many people are too negative toward this market and too many shorts have piled onto the recent upward momentum in our opinion.    Basically, we believe that when you want to trade this market down, you definitely want to do it with good timing.   First of all, you want to go negative really hard at the beginning of the crisis and in a seasonally slow environment.    Right now, there's definitely no saying that we are at the end of the crisis but we are definitely far from the beginning of it.     People are fully aware what the problem is and measures are being put in place to correct the problem.   It does take time.    However, you don't want to go really short when things are being fixed, slowly but surely.  

So against all odds, we think the second possibility is that this market churns upwards has much better probability.    In order for this market to dive and take out the November low, you'd need some really disastrous news or the proof that we'd go into a real recession to do that.    Somehow we just don't think any of those two things is in the cards at this moment.    At least, not during the Christmas shopping season, we might add.

Earnings Earnings and Earnings!    What more confident catalyst you need other than earnings?    We have them coming up and the way this market has been setup, anything better than the lowest expectation can cause a good rally upside.   Of course, that also depends from company to company and sector to sector.     Last week we had LEH reporting and we have to say markets reaction has been very positive, despite the drop of all major indices.     In the coming week, we have GS reporting and this is considered best financial house there is.    Again, the way it sets up is that the shorts wanted to push it below $203, which is the recent low and knock it down for good.     If this stock is at $240, we say the odds of getting sold off is pretty high regardless the earning number.    In our opinion, the trade definitely calls for the upside when the number is released.     The next important report in the coming week is RIMM.    In our opinion, the recent 20% drop from the $122 area took away any bearish surprise.    It feels that shorts have pressed a bit too early going into this report on the heels of a couple of firms analysis of RIMM.    It is "unlikely" that RIMM would report a slowdown in its business and we can almost ensure a massive squeeze if it doesn't play out the way bearish camp wanted.     There are quite few other reports in the coming week which include  NKE FDX MS BSC BBY ACN JOYG GIS... quite a few different and important sectors.   This should provide us a good picture whether our economy is heading into a recession or not.     Again, we believe in our thesis that market rarely goes into a crash into an earning season.     Basically, we'd be much more nervous being short than long at this point.

Now some plays....

Solars, is it us or does it feel that most if not all solar stocks are being setup conspicuously on Friday?   Just look at some the chart setup from some of the popular names and we swear they are all setting up for a good run-up in the coming week.     By the way, they are being setup(in a very positive way) on a day that all indices dropped well over 1%.    This is simply amazing which tells us that people want to own these things at year end.   Basically we still have a bit over a week to window dress these names and it isn't a myth that the best stocks get owned at the end of the year to show them on your book.

STP/FSLR/JASO/LDK,  these are what we considered the favourite solar names to trade last week.    With the exception of LDK EPS Dec.19th, which we are still waiting for the audit report to cast away the cloud, a start today as (independent Audit out according to LDK concluded allegations incorrect), the other three are being setup superbly going into next week.  YGE, IBD #92 is also enjoying a nice trend change.

SOLF/CSIQ, these secondary solar plays are also setting up nicely, especially with SOLF.  The 9 ema has just caught up with SOLF and the next move might be big and will likely get this thing out of the recent trend.   With the entire solar sector heating up, we feel the move is very likely to be up than down.  ESLR had 2 nice days after Thursday premkt upgrade and follow up news.

Asian stocks, as seen in charts this weekend they took the week off after a 2 week recovery, following overnight numbers from HANG/SHANG they will most likely continue to be out of favor to start the week. 

LRN, 300k volume and a higher finish on day 2 of trading. If this thing had any volume Friday, it might be already looking at the high $20's.

MELI, this is the play you only can wish we'd all bought more of before Cramers mention.   On the other hand, this is no longer a strange name to traders and with its tighter float and story, anything is possible.    Basically, this one is better now with Cramers exposure than before which is largely an unknown stock to many.    The trading in this one is rather volatile so we'd continue to be inclined to buy on intraday dip and sell into strength.   It has worked beautifully in the past so there's no reason to change the strategy with this stock.  The trend is firmly to the upside since the break at $45.

RIMM, we've been buying some late in the week looking to hold up to the earning report and then play after its EPS is digested.    Again, in either case, if this company reports a good number or the market rallies, we'd be all over this beta name along with other heavy favourites like BIDU AAPL GOOG etc.

VIP, MBT..also seemingly against all odds these were green on Friday, closing around highs of day.  Another Russian stock, WBD pulled off another impressive Q with what looks like their best EPS number yet. Again as we 've seen too many times lately, nobody was interested in earnngs, this time because of CPI data headline.   Simply, you had pockets of strength to buy...the solars, the biotech, the russian stocks late in the week despite the volatility to the downside in the overall market.

Bottom line, this is the time where you have to be playing the most popular stocks.   We have seen it that the small caps aren't exactly working so you might as well join the crowd.   The more crowded it gets with a good mover, the better.    We can even see it with some of the recent story stocks from the biotech sector like RIGL SVNT BMRN etc.   You trade what others trade, when a stock is showing upside momentum that is.   Only then, you'd have a chance to outperform others.