A Couple Miscellaneous Links...

Here's a quickie post with a couple miscellaneous links of interest I happened upon this week.

The first is a link to a new trading system which I have begun to experiment with. I found it on Ken Wolff's daytrading website, MTrader. This is a top-notch site focused primarily on daytrading, with a great educational section. The system is called the Catman system, and details about it can be found here and here. Catman's system is very much a common-sense based system, and though not entirely fool-proof (no system truly is, and anyone who tells you otherwise should not be trusted).

I am experimenting with the Catman system in all three of my accounts, namely the trading account, the IRA, and the 401k. In doing this blog so far, I've learned it's important to have a defined system and stick with it, one that gives clear-cut signals of when to buy/cover, sell/short, and avoid. It also helps to take the emotion out of the process. The Catman system appears to function well in multiple timeframes (as would many systems).

The tentative plan is to use the Catman system with daily/weekly charts with the indices in my 401k (I have a lot of index funds in my 401k). Likely, I will use the system with daily/weekly charts of individual stocks and/or levered index ETFs in the IRA. As for the trading account, I will probably try to use intraday charts for daytrades and multi-day trades in the indices and individual stocks. Most likely, I will be sticking with the indices and associated leveraged ETFs in all three accounts for the time being and eventually ease my way into individual stocks in daily and intraday timeframes.

I'm still working this out here, but I think it's quite promising.

The Market Speculator on his blog is presently doing a once-a-week series about how to effectively manage time as a part-time trader. I'm just putting a post here to provide a link to what he's done so far because it's really quite insightful. He's done two parts so far, and they can be reached below.

Part 1

Part 2

That's about it for now.

Weekly Preview 24-28 August...

I didn't post much last week, as my market time was sidetracked in several different directions. Anyway, the bears started strong last week, but by Tuesday, the bulls had regained control and have now pushed us higher. Last week was expiration week, so we'll probably see a bit of a post-expiration hangover again on Monday. Also, the last day of August is next Monday, so I would expect the bulls to be able to hold us up through this week and into next week (which will experience holiday trading, which also tends to have a bullish bias). I would not expect the bears to get much going on the downside for the next couple weeks.

Earnings are pretty slow this week, as we're well past the peak of the season. However, there is still a lot of retail coming up.

I will defer to Michael McDonough's blog for a better description and overview of those than I could give. It is located at http://fiateconomics.com/

Earnings will continue to pour in this week, too. I use www.earnings.com as my source for earnings reports. These are very important to follow because they have a way of scrambling up the charts. I don't like being in stocks before they report earnings unless I am somehow hedged, be it through reducing my position size or some options action or whatever. I've come to view earnings as a very binary event, a coin flip, if you will. Loading up heavily one way betting on the outcome of a report AND the market's reaction is a very risky endeavour.

The same listing convention still applied. If it reports after the close Tuesday or before the open Wednesday or is shown as Wednesday with no given time, it is listed here as Tuesday. I've also listed the previous Friday's here, too.

Friday: none

Monday: BIG, BGP, BKC, CHS, CMRG, COCO, MDT, SAFM, SBA, SPLS, TUES,

Tuesday: BCSI, DY, ACH, BWS, CM, CEO, CCUR, DLTR, DSW, ISLE, KIRK, WSM,

Wednesday: CWTR, GES, HEI, JAS, SIGM, TIVO, AEO, APWR, CSUN, CHA, DLIA, FRED, GCO, GRB, JCG, RY, SZE, TOL, TD, VIP,

Thursday: ARUN, BEBE, LAVA, MRVL, OVTI, SLH, BNS, TIF,

Friday: CMM, TTWO,

Position: none

FCX (Short)...

It's been a long time since we looked at FCX as a short here. And that setup for a head-and-shoulders top failed miserably. Indeed, that actually would've proven to be a great time to buy. I missed that one. It could've been worse; I could've been short of it through that massive move higher. Oh well.

But I'm going back to the well here. This time, I think it's an island top forming in FCX. You can see how FCX gapped up to begin August, but gapped down today, thus creating a little island of sorts. This is typically a pretty reliable pattern for a top. Today was also significant in that $60 acted as resistance for several months until it was broken by the aforementioned gap-up to start August.

So we'll look to play it by having a stop above today's highs (call it $61 or so) because if it goes that high, it's probably going to fill that gap, which would take us probably up around $64 or so. I would look for the 50-day and 200-day EMAs to act as support temporarily on a pullback, but if this pattern really sets in, FCX could head back to the bottom of the range and end up around $45.



Position: none

Overview Monday 17 August...

The bears actually got something going today to start off options expiration week. I was flabbergasted. Though the bulls were able to hold the lows into the close around 980 on the $SPX, they couldn't muster any kind of rally. Volume picked up today, as well. This is ok, though. This is what a correction feels like. Corrections are painful, gutwrenching even. Many times, the biggest recent winners are the biggest losers in a correction. Until the dip-buyers show up, I would be inclined to stand aside and not press much on the long side, preferring to let the market come to me and my levels (and hopefully bottom for me instead of trying to catch the falling knife). As long as this correction doesn't turn into a full-blown reversal, the bulls are still in charge. I'm not inclined to aggressively short at this time, but it's safe to consider shorts again (for now).

Short-term bias: bearish (I'm still maintaining this as bearish, if only because I'm not chasing, but I do believe we had a buying climax)

Intermediate-term bias: bearish (I still think this correction will take us lower, perhaps to 800 on the $SPX and I don't think we're ready to power higher quite yet)

Long-term bias: bullish (I believe we put in meaningful, long-term bottoms in March, and would use the aforementioned correction to increase long exposure)

Pick updates:

As you can see, everything was down today (literally). You will also note that the early cyclicals and economically-sensitive stocks, such as F, FCX, and MAS, took it most bruntly today.

EGO also had a surprisingly bad day, but you can see why I didn't want to chase it last week.

This kind of pullback is bullish in the end because it provides us better entries.

No new additions to the prospects list, either.





Position: long $SPX index fund in 401k

Weekly Preview 17-21 August...

Well, last week's wave of retail earnings is followed up by this week's tsunami of them. Besides retail, there's not much of interest in the way of earnings reports. The bears were actually able to get something going towards the end of last week, so I wonder if they'll be able to follow through, or at least stop the relentless uptrend.

There are also some big macro releases this week. I will defer to Michael McDonough's blog for a better description and overview of those than I could give. It is located at http://fiateconomics.com/

Earnings will continue to pour in this week, too. I use www.earnings.com as my source for earnings reports. These are very important to follow because they have a way of scrambling up the charts. I don't like being in stocks before they report earnings unless I am somehow hedged, be it through reducing my position size or some options action or whatever. I've come to view earnings as a very binary event, a coin flip, if you will. Loading up heavily one way betting on the outcome of a report AND the market's reaction is a very risky endeavour.

The same listing convention still applied. If it reports after the close Tuesday or before the open Wednesday or is shown as Wednesday with no given time, it is listed here as Tuesday. I've also listed the previous Friday's here, too.

I have bold-faced reports that could potentially affect present picks.

Friday: LOW,

Monday: A, TSL, CAH, HD, SKS, SOLF, TGT, TJX,

Tuesday: ADI, HPQ, LZB, BJ, DE, EV, GYMB, NTAP, PERY, TWB, YGE,

Wednesday: HAR, HOTT, JDSU, LTD, PVH, BKS, BONT, DKS, DITC, FL, GME, HNZ, HRL, NM, PDCO, RTP, ROST, SHLD, SFL, GASS, SMRT, STP, TECD, BKE, PLCE, WTSLA,

Thursday: ARO, BRCD, JRJC, GPS, HIBB, INTU, JMBA, MENT, OTEX, PSUN, CRM, ZUMZ, ANN, SJM,

Friday: none

Position: none

Overview Friday 14 August...

The bears actually sort of got something going today, but not enough to make me think the tide is turning. However, the bulls were able to take us higher into the close and off the lows of the day, though we were still broadly red on the day. Volume was low, as it was a summer Friday and the newsfow was pretty tranquil. It was a good day for a vacation day.

Short-term bias: bearish (I'm still maintaining this as bearish, if only because I'm not chasing, but I do believe we had a buying climax)

Intermediate-term bias: bearish (I still think this correction will take us lower, perhaps to 800 on the $SPX and I don't think we're ready to power higher quite yet)

Long-term bias: bullish (I believe we put in meaningful, long-term bottoms in March, and would use the aforementioned correction to increase long exposure)

Pick updates:

Aside CELG, which was flat, and BAC, which was up, everything was down. On the whole, the losses were pretty benign, as the market rallied into the close.

I've removed BNI and SGR from the list, as well. I've also culled the prospects list considerably.





Position: long $SPX index fund in 401k

Overview Thursday 13 August...

Once again, the bulls held the market tough. There wasn't really much going on today. We had some earnings and some macro reports out of retail land, but that's about it. Sadly, I was tied up in meetings pretty much all day at my job, so I didn't get to watch the market really at all. Such are the drawbacks of having a first-shift job in New England.

Short-term bias: bearish (I'm still maintaining this as bearish, if only because I'm not chasing, but I do believe we had a buying climax)

Intermediate-term bias: bearish (I still think this correction will take us lower, perhaps to 800 on the $SPX and I don't think we're ready to power higher quite yet)

Long-term bias: bullish (I believe we put in meaningful, long-term bottoms in March, and would use the aforementioned correction to increase long exposure)

Pick updates:

EGO was today's big winner. Its CEO was interviewed on Mad Money last night, so the stock benefited from the Mad Money Effect (aka the Cramer Pop). Mad Money is a widely-watched show, and stocks that are mentioned positively on there tend to get some strong action at the open the following day. It's really quite amazing to watch. If you watch the show with a real-time trading program running in the background, you can actually watch the stocks he mentions pop in the aftermarket. EGO was set up perfectly for this, with a low-volume pullback pattern, and it just needed a catalyst to break out. It got it. EGO is a buy on weakness if you are bullish on gold and I would agree with Cramer that it is one of the best producers out there. Plus it's small.

BAC was also a big winner because of the "news" I mentioned yesterday. It wasn't really news at all, but whatever.

I am taking MJN off the watchlist because I will be moving this one over to the IPO Trader blog.

More watchlist cleaning to come over the weekend, and some additions. I know I said that last weekend, but I mean it this time. :-p





Positions: Positions: long $SPX index fund in 401k

Overview Wednesday 12 August...

The bulls are still in charge. We started off strong today, but it was pretty boring until 2:15, when the Federal Reserve announced no changes to their rates and a minor wording change in their statement. The market dropped, then popped, then dropped again into the close, but managed to hold well positive for the day.

The post-Fed response was surprisingly dull. The market was actually beginning to price in a possible rate hike by Q1 of 2010, but it appears to have backed off on that and is now not expecting a rate hike before Q3 2010. I'm talking yield curve here, not stock market. To make a long story short since this is a stock blog not a macroeconomics blog, the yield curve steepened today, which indicates the market has pushed out any expected increase in Fed rates.

Short-term bias: bearish (I'm still maintaining this as bearish, if only because I'm not chasing, but I do believe we had a buying climax)

Intermediate-term bias: bearish (I still think this correction will take us lower, perhaps to 800 on the $SPX and I don't think we're ready to power higher quite yet)

Long-term bias: bullish (I believe we put in meaningful, long-term bottoms in March, and would use the aforementioned correction to increase long exposure)

Pick updates:

I sold my PALM calls today. The action from Monday was a big yellow flag to watch this position, as it was a high-volume move towards support at the 50-day EMA. The plan was to give it a little room to try to recover, which it was doing ok at yesterday. But, today, the volume was even higher, suggesting that a significant breakdown was taking place, especially on a day where the rest of the market was up. I think PALM has further downside and is off my watchlist.

Not really much of interest elsewhere on the watchlist. BAC is up big in the aftermarket on news of a big stock purchase, but that's about it. CY also had a solid rally, and this one looks buyable for a starter long position at present levels, but with room to add.





Positions: long $SPX index fund in 401k

Overview Tuesday 11 August...

The bears were able to actually do something today, but the selling has still been mild and contained. The bulls are still in charge, however. Volume was pretty low today, and the heaviest hit stocks today were the best movers from the recent rally. Volume has been light so far this week, which is to be expected since we have a Fed announcement tomorrow afternoon. So, expect mild action tomorrow until that happens.

Short-term bias: bearish (I'm still maintaining this as bearish, if only because I'm not chasing, but I do believe we had a buying climax)

Intermediate-term bias: bearish (I still think this correction will take us lower, perhaps to 800 on the $SPX and I don't think we're ready to power higher quite yet)

Long-term bias: bullish (I believe we put in meaningful, long-term bottoms in March, and would use the aforementioned correction to increase long exposure)

Pick updates:

AIG is just too volatile for what I'm trying to do with this blog, so I will be taking this stock off the watchlist. It was the big loser today.

MDR was the big gainer today, but it is also a candidate for removal. Other candidates for removal include BNI and SGR.

PALM held its own today, which is encouraging. I'm still in this one.

No changes to the potential new picks today, but I've relisted them anyway.

Potential new long picks: AA, AINV, ANSS, BZH, CBS, CQB, CROX, CSIQ, CTSH, FSYS, FWLT, GLBL, GRMN, GXP, HANS, HBC, IAG, JOE, LEN, LL, MMC, PCLN, RL, SPG, THS, TKC, VNO, WFMI

Potential new short picks: ICE, STEC



Positions: long PALM November $12.50 calls and $SPX index fund in 401k

Overview Monday 10 August...

It looked like the bears were going to get something going, but they didn't. The market is still holding firm and the bulls are still decidedly in charge. We still could use a pullback, though. It's still hard to buy up here if chasing isn't your style, but that patience will be rewarded eventually with a lower-risk set of entries.

Short-term bias: bearish (I'm still maintaining this as bearish, if only because I'm not chasing, but I do believe we had a buying climax)

Intermediate-term bias: bearish (I still think this correction will take us lower, perhaps to 800 on the $SPX and I don't think we're ready to power higher quite yet)

Long-term bias: bullish (I believe we put in meaningful, long-term bottoms in March, and would use the aforementioned correction to increase long exposure)

Pick updates:

I'm out of DFS (way too late, but better late than never).

PALM took a beating today, but I'm still in it. It managed to basically hold the most recent lows, and as long as it does that, we're not in a downtrend. We had a lower high last week, which is a yellow flag, and today's volume was larger than it has been recently, which is another yellow flag. This is definitely one to keep an eye on.

AIG has rallied hard, and I hope nobody got caught short this thing. It's running into resistance at $30, so a small starter position in AIG as a short could be worthwhile here. As expensive as buying puts is in this name, you CANNOT short the common stock. Events like last week show why. If you were in puts, you'd lose 100% of your money, but if you were short the common stock, you could've lost more than 100% of your money.

Still tons of longs that look juicy on pullbacks. I'm liking F, BAC, and MAS in particular.

I'm mulling switching FCX to a long provided it manages to hold above $60. If it fails to hold $60, I would be inclined to short it. It broke out of a multi-month base and is still consolidating. Let's see what it does first before deciding what to do with it.

Potential new long picks: AA, AINV, ANSS, BZH, CBS, CQB, CROX, CSIQ, CTSH, FSYS, FWLT, GLBL, GRMN, GXP, HANS, HBC, IAG, JOE, LEN, LL, MMC, PCLN, RL, SPG, THS, TKC, VNO, WFMI

Potential new short picks: ICE, STEC

I won't be putting out any new picks until I clean up the present watchlist a little bit.



Positions: long PALM November $12.50 calls and $SPX index fund in 401k

Weekly Preview 10-14 August...

I didn't pay much attention to the markets most of last week, as I was out on vacation. I did a couple daytrades, but that's about it. It'll take a day or two to get back fully into the swing of things. I don't anticipate blogging as frequently as I have been.

This week will be a big week for retail sector earnings reports. It will be very interesting to see how these play out, but aside from retail, there's not a lot cooking on the earnings calendar this week.

There are also some big macro releases this week. I will defer to Michael McDonough's blog for a better description and overview of those than I could give. It is located at http://fiateconomics.com/

Earnings will continue to pour in this week, too. I use www.earnings.com as my source for earnings reports. These are very important to follow because they have a way of scrambling up the charts. I don't like being in stocks before they report earnings unless I am somehow hedged, be it through reducing my position size or some options action or whatever. I've come to view earnings as a very binary event, a coin flip, if you will. Loading up heavily one way betting on the outcome of a report AND the market's reaction is a very risky endeavour.

The same listing convention still applied. If it reports after the close Tuesday or before the open Wednesday or is shown as Wednesday with no given time, it is listed here as Tuesday. I've also listed the previous Friday's here, too.

I have bold-faced reports that could potentially affect present picks.

Friday: KDE, BBEP, DYN, HOC, PCLN, ROSE, URRE,

Monday: CPST, CLNE, CPL, FLR, FRPT, MDR, RAX, AMAT, BPHX, DNDN, FOSL, FTEK, GEOY, SEED,

Tuesday: CLDN, CLWR, CREE, PAL, PAAS, PRGN, SQM, BHP, CCJ, EJ, ETH, ING, JASO, KGC, LIZ, M, PWE, RICK, SLE, TOL, DV, DPS, FIG,

Wednesday: AAP, BYI, BAP, LDK, NTES, SOL, KSS, EL, VSHP, URBN, URS, WMT,

Thursday: BBI, JWN, RRGB, ANF, JCP, PBR,

Friday: A

Position: none

HAS and MAT (Longs)...

I only did two picks over the weekend, so here's two tonight of interest. They're both toymakers, HAS and MAT. Both reported earnings in July, so we're good there for a little while. This is kind of a tricky situation in that I like MAT's chart better, but HAS has the upcoming catalyst for some further movement in the new GI Joe movie (which I'm totally pumped about).

MAT has the better chart because this break above $17 is very significant. It was a move above multi-month resistance (it actually dates back several months beyond what this chart shows). I'm looking to take a starter on a low-volume pullback towards $17. I like the consolidation pattern we're seeing here, like in so many other stocks.



HAS, on the other hand, has some more work to do. I like the consolidation, but it's got that high from May around $28 to overcome before it can really power higher. I would expect the upside to come harder for HAS, but the potential is there. This is another one to keep an eye on.



Position: none in stock/options, but long a bunch of GI Joes and Transformers from my youth

Overview Monday 3 August...

The bulls stormed out of the gates to start the new month. Given the start-of-the-month inflows, this should not have been a surprise. The $SPX did make it over the 1,000 level today, but I think resistance is going to kick in soon. The running of the bulls can continue a bit longer, but this is a tough market because if you weren't heavily long already, it's been a vertical and relentless rally with very little consolidation. So, you either have to be willing to chase or be willing to be patient and sit on your hands a bit. I've opted for the latter here.

Short-term bias: bearish (I'm still maintaining this as bearish, if only because I'm not chasing, but I do believe we had a buying climax)

Intermediate-term bias: bearish (I still think this correction will take us lower, perhaps to 800 on the $SPX and I don't think we're ready to power higher quite yet)

Long-term bias: bullish (I believe we put in meaningful, long-term bottoms in March, and would use the aforementioned correction to increase long exposure)

Pick updates:

F just won't quit. However, I didn't like today's action in the name. It felt like a buying climax. Volume was huge, the stock closed at the lows of the day, and the stock was unable to hold its open. I think this one has further to fall, but it's still a bullish chart.

BAC appears to have resolved that squeeze in a bullish manner. It even took out the previous highs. I am looking to buy this one.

Aside from those, there's not much else to say. So, I'll add a new blurb here. Now I'll keep a list of stocks not yet on the list, but probably will get there sooner or later.

Potential new long picks: AA, HBC, LEN

Potential new short picks: none



Postions: long DFS August $12.50 puts, PALM November $12.50 calls, and $SPX index fund in 401k

EXPE (Long)...

EXPE reported earnings last week and left behind a good multi-month base. This looks like a continuation gap. You can see that back in late April it had a massive gap-up above the 200-day EMA (this one looks like a breakaway gap) and a successful retest of the 200-day EMA back in July. The gap left last week feels more like a continuation gap than an exhaustion gap, but only time will tell. I'm liking what I see here. There are multiple ways to play this one. If Thursday's lows fail to hold, that gap is probably going to get filled and EXPE would probably return to $18. If it goes lower than that, it's going to fall back into the base, and I would then look for a pullback towards the 200-day EMA to act as support. However, I think the stock will hold and after a little consolidation, I believe it will power higher. I'm looking to use weakness towards Thursday's low as a chance to start buying.



Position: none

EGO (Long)...

This one interests me. EGO reported earnings last week. As you can see, EGO consistently manages to hold support at the 200-day EMA as it creeps higher in a series of higher highs and highers lows. There are two ways to play this one. The preferred method would be to buy a low-volume pullback towards the 200-day EMA, but if the stock breaks out to new highs, it may be worthwhile to chase. However, the former is clearly preferable. This is one to keep an eye on.



Position: none

Weekly Preview 3-7 August...

First, I'll be on vacation this week, so posting will be sporatic (or perhaps nonexistent).

The bulls were able to hold tough last week, exactly like we expected them to do. This week should be interesting. The earnings season has definitely peaked and is now on the decline, but there are still some big ones coming out. I don't expect a lot of action this week, to be honest. Summer is still winding down, but it's not quite done yet.

There are also some big macro releases this week. I will defer to Michael McDonough's blog for a better description and overview of those than I could give. It is located at http://fiateconomics.com/

Earnings will continue to pour in this week, too. I use www.earnings.com as my source for earnings reports. These are very important to follow because they have a way of scrambling up the charts. I don't like being in stocks before they report earnings unless I am somehow hedged, be it through reducing my position size or some options action or whatever. I've come to view earnings as a very binary event, a coin flip, if you will. Loading up heavily one way betting on the outcome of a report AND the market's reaction is a very risky endeavour.

The same listing convention still applied. If it reports after the close Tuesday or before the open Wednesday or is shown as Wednesday with no given time, it is listed here as Tuesday. I've also listed the previous Friday's here, too.

I have bold-faced reports that could potentially affect present picks.

Friday: CLX, DGW, HBC, HUM, JRCC, MRO, MDU, MGM, TAP, MWA, OREX, POR, TSL,

Monday: APC, ARNA, CTX, CHK, HOLX, MWA, PHM, SMSI, STEC, PFG, UPL, UDRL, VMC, AYE, ADM, BRY, FUN, CHD, CTSH, ED, CVS, DHI, DNR, DUK, EMR, ETR, EXPD, FTR, HW, HNT, HS, HSIC, HEW, ICON, ICE, NRGY, JSDA, MLM, NI, OZM, ONXX, PNW, PPL, PGN, RDC, SPG, BID, SWX, SE, THC, PTRY, JOE, TM, UBS, VNO,

Tuesday: APEI, BBND, BMC, BKI, SAM, CEPH, CSTR, CTRP, DVA, DENN, DIVX, DM, DTG, ERTS, SOLR, HCC, JACK, KFT, MASI, MOLX, PZZA, TSRA, TRLG, VCLK, WFMI, AUY, NDN, AGU, AFAM, AWC, AXL, ASCA, WTR, BHI, BZ, CFL, BIP, CCC, CNP, CEDC, CNQR, DWSN, DF, DVN, EBIX, EXM, FIG, FWLT, GRMN, IPSU, IFF, LINC, LL, MMC, NU, OC, PZE, HK, RL, PG, PWR, RDN, RRD, SUN, RIG, TKC, XTO,

Wednesday: ALJ, ACF, ANDE, ATW, BBBB, CECO, CSCO, EGLE, FRP, BGC, ROCK, GLBL, GDP, GXP, HCN, HIMX, IOC, IO, MSSR, MOVE, MUR, ONNN, PACR, PVR, PRU, TECUA, ALL, ACM, AER, ACS, ATK, AIPC, ANSS, EAT, BRS, CSIQ, CMCSA, CLR, CTB, DPTR, DSX, DLTR, EP, FTO, GNA, GFI, HUN, IAG, IMAX, KSWS, MIC, MBI, MPEL, PCS, MIL, NVDA, NVO, OMG, PDC, PSA, RAH, SNI, SIRI, BX, NDAQ, DTV, TRI, WNR, WIN, WWE,

Thursday: ACTI, ASEI, AINV, APL, BZH, NILE, BRKS, CPKI, CBS, CQB, CSC, CROX, HEV, EOG, FSYS, HANS, ZINC, IPI, IPAS, MXIM, MCHP, ONT, OPLK, PGH, POM, SD, TMRK, THS, TPC, VRSN, WTW, ABR, BAM, EIX, MIR, NAT, PMI,

Friday: KDE, BBEP, DYN, HOC, PCLN, ROSE, URRE,

Position: none

Overview Friday 31 July...

Friday was a somewhat eventless close to the month. The broad indices were more or less flat for the day to cap out a very bullish month. So August starts on Monday, and I expect to see some start of the month inflows. At the start of the month, a lot of money tends to rush into the market as IRAs tend to put money into the market. I do think the market is starting to peter out and I expect a further pullback coming up. The action from this week feels panicky and felt very manipulated to go with the end of the month.

Short-term bias: bearish (I'm still maintaining this as bearish, if only because I'm not chasing, but I do believe we had a buying climax)

Intermediate-term bias: bearish (I still think this correction will take us lower, perhaps to 800 on the $SPX and I don't think we're ready to power higher quite yet)

Long-term bias: bullish (I believe we put in meaningful, long-term bottoms in March, and would use the aforementioned correction to increase long exposure)

Pick updates:

I did a little housecleaning in the list. I've removed ALVR and RIG.

ALVR had a dreadful week, shedding about 20% following a weak quarter and the resignation of their CEO. I don't like this stock's chances of holding support, and I am removing it from the watchlist.

As for RIG, I simply don't like its setup anymore as a short. It rallied above its 200-day EMA and thus far has successfully held that level. I think it holds support here and I don't see it as a viable short right now.

The early cyclicals were the big movers today, with BAC, F, GT, and MAS rallying hard. Pretty much everything else was flat.



Postions: long DFS August $12.50 puts, PALM November $12.50 calls, and $SPX index fund in 401k

GT (Long)...

In my seemingly endless series of stocks that move huge on earnings and break out of multi-month bases, today we have GT. It's extended following today's move, of course, but today's move was a powerful one. I'd look for a pullback towards prior resistance at $14 (dashed purple line) to start accumulating some long exposure here. As always, if that prior resistance fails to act as support for the price, then the stock falls back into the congestion pattern and is not ready to power higher.



Position: none

Overview Thursday 30 July...

The bulls came out hot at the open in a stark contrast to the previous few days. They even created a big gap-up open. They tried to run the $SPX over 1,000, but came just short. The $COMPX actually got over 2,000 briefly today. However, the bulls were not able to keep it up into the close. Though we still finished broadly higher on the day, the weakness into the close is a very big yellow flag. Today's action felt like end-of-the-month markups prior to tomorrow's GDP release, and the early buying felt like some more panic buying. We'll have to see how it plays out tomorrow, but today could've been a buying climax for the multi-week advance.

Short-term bias: bearish (I'm still maintaining this as bearish, if only because I'm not chasing, but I do believe we had a buying climax)

Intermediate-term bias: bearish (I still think this correction will take us lower, perhaps to 800 on the $SPX and I don't think we're ready to power higher quite yet)

Long-term bias: bullish (I believe we put in meaningful, long-term bottoms in March, and would use the aforementioned correction to increase long exposure)

Pick updates:

CY is one to watch. It appears to have put in a climax today, but on a pullback into the $9.50-$10 range, I'll start a long position.

Some of the early cyclicals (F, MAS, and PPG) really ran today, but I'm not chasing these up here because I believe I'll be able to get into all three cheaper than they presently are. I still like all three as longs, but not up here.

SBUX and CELG are also trying to break free. These are two to keep an eye on, too.

I'll do some housecleaning in the list this weekend. It needs to happen.



Postions: long DFS August $12.50 puts, PALM November $12.50 calls, and $SPX index fund in 401k

MCK (Long)...

Another day, another stock that gaps up huge because of earnings. Today, it's MCK. The setup should look very familiar by now. The high volume move above multi-month resistance at $46 (dashed purple line) bodes well for further upside in MCK, but as usual, it's too extended to chase right now. I'd love to see today's gap get filled, but I think the way to play this one is to start nibbling around today's lows (call it $50), but if that fails to hold, I think the stock will fill that gap. We'll stalk this one and see what happens from here. A yellow flag against this stock is the fact that it did not close near its highs. It's a yellow flag for now.



Position: none

Overview Wednesday 29 July...

The pattern continues. We saw some weakness in the morning, but closed well off the lows of the day, albeit still in the red. We still haven't seen any significant weakness, certainly not enough to make me think we've got an impending reversal coming. However, the weakness in the energy/commodity space and the other cyclicals was particularly notable. It's nothing that makes me want to aggressively get short at this time because the bulls are holding the market up very well this week, with minimal downside, as I expected this weekend.

Short-term bias: bearish (I'm still maintaining this as bearish, if only because I'm not chasing)

Intermediate-term bias: bearish (I still think this correction will take us lower, perhaps to 800 on the $SPX and I don't think we're ready to power higher quite yet)

Long-term bias: bullish (I believe we put in meaningful, long-term bottoms in March, and would use the aforementioned correction to increase long exposure)

Pick updates:

ALVR took an epic beatdown today, as it lost about 17%. It wasn't so much the report of a bigger than expected quarterly loss, though. It was also announced today that the CEO is stepping down. Despite the 4x average daily volume of today's selloff, I'll keep ALVR on the list for the moment because it was able to close right around the intersection between its 50-day and 200-day EMAs.

As I mentioned above, the cyclicals took a beating today, including FCX, SGR, MDR, and RIG. Several others, like EBAY, F, SBUX, CELG, MAS, and MJN simply continued consolidating.



Postions: long DFS August $12.50 puts, PALM November $12.50 calls, and $SPX index fund in 401k

MAS (Long)...

Check it out. It's a non-tech long pick, but it's still an early cycle play. MAS is today's pick. They reported earnings this week and had a monster move today. MAS is way too extended to be chasing it right now, but on a little consolidation, this is one to watch. Ideally, it pulls back and fills the gap created today, which would put it in the $11 range. This would be the best buying setup, but we may not get that.



But, wait, there's more. We're going to look at the five-year weekly chart of MAS, too. And you'll see why I'm liking this one.



Do you see what I see? It's a textbook head and shoulders bottom. MAS bottomed out at around $3.50 in March and the neckline is around $11.50 or so. With this, the measured move is $11.50 + ($11.50-$3.50) = $19.50. The neckline is green and the target is purple. Also, notice how the target corresponds quite nicely with the last set of highs. Given that the pattern took about a year to form, we'll need to give it about that time to reach that target. I'm looking to take some calls and then turn those into call spreads as I wait for this move to play out.

Position: none

Overview Tuesday 28 July...

Like yesterday, not a whole heck of a lot to say. However, a clear pattern has been emerging lately. We're seeing a lot of weak opens in the mornings and weakness that persists through say lunchtime, but we're seeing strong closes, as the market consistently is going out at/near its highs for the day. This tells me we have an underlying bid in the market, as the bulls are seizing on any dip to buy. This is not the kind of thing you look to short unless you're looking for quickie trades. I was tempted today in a couple cases, but didn't pull the trigger. I still expect us to hold up through the end of the month.

Short-term bias: bearish (I'm still maintaining this as bearish, if only because I'm not chasing)

Intermediate-term bias: bearish (I still think this correction will take us lower, perhaps to 800 on the $SPX and I don't think we're ready to power higher quite yet)

Long-term bias: bullish (I believe we put in meaningful, long-term bottoms in March, and would use the aforementioned correction to increase long exposure)

Pick updates:

This weekend I'll do some housecleaning on the list here. Expected deletions include BNI, DELL, SGR, and MDR. I may also shed ALVR, but we'll see. DFS will be shed once I get a better escape. I'd like to keep this list at 25-30 stocks. Part of the reason I started this blog was to focus my efforts, and if the watchlist gets too big, then that kind of defeats that whole purpose.

Still not a whole heck of a lot of movement, just some consolidation. However, CELG did poke its head above the previous high like F did yesterday, so these two are still ones to watch.

Nearly nibbled on some VMW calls today. I was looking at the October $30's. I'm liking those, as they're far enough away to allow me to sell some calls against them in call spreads.



Postions: long DFS August $12.50 puts, PALM November $12.50 calls, and $SPX index fund in 401k

VMW (Long)...

I know, I know, another tech pick. I can't help myself. This time, it's VMW. I like the big breakout above the multi-month base following last week's earnings. I nearly pulled the trigger on this one earlier today, but decided not to quite yet. I believe this one is buyable around current levels with a tight stop. The lower volume over the past couple days is ok because that just means there's some profit-taking going on, which is healthy. If it fails to hold this gap-up, it's going to fall back into the big base, which would tell us it's not quite ready to power higher. Keep an eye on this one. I think it has some big promise.



Position: none

Overview Monday 27 July...

Not a whole lot of interest today. Though the bulls were pushing a bit today, most of the day seemed to be more of a rest from the frantic pace of last week. The bulls are still in charge, but they're just taking a rest. This is similar to the action I was expecting over the weekend, a bullish bias with a less frenzied feeling. A little rest is in order because a correction doesn't have to be a drop. A correction can also be consolidation.

Short-term bias: bearish (I'm still maintaining this as bearish, if only because I'm not chasing)

Intermediate-term bias: bearish (I still think this correction will take us lower, perhaps to 800 on the $SPX and I don't think we're ready to power higher quite yet)

Long-term bias: bullish (I believe we put in meaningful, long-term bottoms in March, and would use the aforementioned correction to increase long exposure)

Pick updates:

So much for taking a rest. F pulled back near support and proceeded to rally about 7%. I figured it would need more time to rest, but I was wrong and I missed the boat this morning. F, being an automaker, is a classic early cyclical play, so those believing we're in the beginnings of an economic recovery would gravitate towards early cyclicals (other examples include financials, homebuilders, and certain tech stocks).

PALM also staged a nice bounce today. I will be watching this bounce for a chance to sell some calls against my existing position.

ALVR, like so many other stocks, is looking mighty extended here, and I wouldn't be buying here. I think it pulls back to the bottom of the range over a couple weeks.



Postions: long DFS August $12.50 puts, PALM November $12.50 calls, and $SPX index fund in 401k

Weekly Preview 27-31 July...

The bulls kept the momentum going last week in a big way, but earnings season has probably seen its peak as far as big names reporting, so it will be interesting to see if they can keep it going once the tailwind of earnings is gone. I'd love to see some pullbacks and consolidation, but whether we get that or not is another matter entirely. Powerful momentum in both directions has a tendency to not go away without a fight, so let's see what happens. I think the bulls will be able to hold the market up through the week as end-of-the-month support will set in. At the end of the month, and especially at the end of the quarter, the markets tend to have a bullish bias as the institutions do their best to mark up their positions to make their performance look better.

Earnings will continue to pour in this week, too. I use www.earnings.com as my source for earnings reports. These are very important to follow because they have a way of scrambling up the charts. I don't like being in stocks before they report earnings unless I am somehow hedged, be it through reducing my position size or some options action or whatever. I've come to view earnings as a very binary event, a coin flip, if you will. Loading up heavily one way betting on the outcome of a report AND the market's reaction is a very risky endeavour.

The same listing convention still applied. If it reports after the close Tuesday or before the open Wednesday or is shown as Wednesday with no given time, it is listed here as Tuesday. I've also listed the previous Friday's here, too.

I have bold-faced reports that could potentially affect present picks.

Friday: ACV, ANR, BOH, BWP, CYOU, CALM, GLW, EPD, HON, ICO, LO, RSH, SOHU, TZOO, TLAB, VZ

Monday: ACE, AMGN, BWLD, CF, GLW, CR, HMA, HXL, MTW, MAS, MTH, OLN, OMI, PCL, RCII, TRID, BEAV, BP, CE, CRDN, CBI, CHKP, COH, CVH, CPO, CYNO, DB, DIN, ELNK, FPL, GPI, IMA, JEC, FSTR, MEAN, NOV, ODP, PCAR, ORB, ROK, SII, SVU, TEVA, TXT, MHP, UA, X, VLO, VIA, WAT,

Tuesday: COLM, CMP, DWA, FTI, HTZ, LUX, MEE, MCK, MEOH, MRH, NSC, PNRA, GOLD, WDC, XL, AET, AKAM, ALVR, AMT, MT, ACAT, BWA, BPO, CETV, COP, DAI, DFG, GD, HL, HES, HMC, HSP, JNY, ID, LAZ, MSO, MW, MHS, MCO, NYB, OII, PENN, PAG, PX, Q, SNY, SAP, SO, S, SYMC, TASR, TKR, TWC, TWX, VPHM, WPI, WLP, WYN,

Wednesday: AFL, AMAG, AMKR, AIZ, AVB, CBT, CBG, CMO, CX, CERN, CLF, CYTK, XRAY, ESRX, FLS, GNK, GG, GVA, GMCR, HBI, HIG, ITRI, KALU, LNC, MANT, MTZ, NETL, NTRI, OIS, ORLY, PRAA, RYL, SEE, RGR, TTEC, TER, TSO, TTEK, TSCM, TRN, VAR, V, ADPT, AKNS, ALU, APA, AMSC, ARJ, ABG, ADP, AVP, RATE, ABX, BDX, BC, BBW, CAB, CRS, GTLS, CI, CINF, CL, CNX, CMI, EK, EXPE, XOM, BEN, GNW, GT, GOLF, HP, HOKU, IP, IRM, KBG, K, KM, KMT, KYO, LVLT, LVS, LZ, MA, MFE, MOT, NWL, NBL, OMX, NYX, ZEUS, OPWV, OSK, PH, PTEN, PCZ, RYN, COL, STRA, TSM, DOW, TRV, TYC, WMI, WEC, WYNN, XEL,

Thursday: AB, ARBA, BEZ, BMRN, CEC, CPHD, DLB, FSLR, MET, MWW, PBI, RST, SLW, SWN, DIS, YRCW, AGN, AU, AIV, AN, BW, CVX, CEG, EGO, D, GHM, ITT, KDN, MTU, GAS, WPO, WY,

Friday: CLX, DGW, HBC, HUM, JRCC, MRO, MDU, MGM, TAP, MWA, OREX, POR, TM, TSL,

Position: none

CELG (Long)...

It's another tech long, but this time it's a biotech long. I'm usually very gunshy in the biotech sector because headlines come out of nowhere in this sector, so you have to tread very carefully. I'm throwing CELG out there as a long. It's another in that long list of stocks that have reported earnings and is consolidating following breakouts from multi-month bases with powerful, high-volume gap-ups. CELG left behind a big gap and I would not be chasing this one up here. The break above the 200-day EMA is very significant here, as it's been under there for the better part of a year. This is one to keep an eye on, and that's exactly what we'll do.



Position: none

MJN (Long)...

MJN is a somewhat new stock. It had its IPO (Initial Public Offering) several months ago. Since the IPO, MJN has gone straight up. IPOs are particularly interesting in that sense. Once it breaks higher/lower from the offering, there is no resistance/support. MJN has been a pretty good buy on weakness since it emerged, and I belive a coming pullback in the stock will present a similar buying opportunity. It reported earnings last week and is very extended, but it'll come to us. As you can see, the 50-day EMA has acted as solid support all along, but that is about 15% below present levels. Be patient with this one. It will present a less risky entry soon. MJN's a bit thinner than I normally like and does not have a very deep options market, but that does not deter me. It just alters my plan.



Position: none

EBAY (Long)...

I like what I see in EBAY following its earnings release last week. Like many other stocks, it has a nice gap-up and is in the midst of consolidating. I would love to see that gap-up get filled and I would love even more to see a low-volume pullback towards previous resistance at $18. This is a very extended stock and I would not be chasing it up here. It could take out the highs of the week and keep going higher, but I don't think that is a likely or sustainable scenario. I'm content to be patient with this one.



Position: none

Overview Friday 24 July...

It sure looked like the bears were going to be able to get something going, as we had the most significant weakness we've seen in the past couple weeks. However, the bulls had other plans, as they pounced on the weakness to drive the market up into the close. The upside momentum has been extremely powerful and is unlike anything I've ever seen. Momentum this strong does not reverse quickly or easily, though the recent buying feels like panic buying. This is not a market to try to short until it actually tops out. This is a tough market. Either you have to be willing to chase stocks higher and higher or you have to be patient. I'm opting for the latter.

Short-term bias: bearish (I'm still maintaining this as bearish, if only because I'm not chasing)

Intermediate-term bias: bearish (I still think this correction will take us lower, perhaps to 800 on the $SPX and I don't think we're ready to power higher quite yet)

Long-term bias: bullish (I believe we put in meaningful, long-term bottoms in March, and would use the aforementioned correction to increase long exposure)

Pick updates:

Not a lot has changed from Thursday's look, to be honest.

PALM found support right where we thought it would and had a very nice bounce on Friday. I still think it's buyable around present levels and I actually like the fact that the momentum traders didn't run this one way higher.

DFS, of course, keeps going higher. A loss is a loss, but I think this one was actually helpful for me because it kept me from getting more short exposure as the market rallied. It's still unfathomable to me how this thing could rally 33% in two weeks and form some new highs. Though powerful, the rally is still less than convincing to me, and I believe I will get a better price to escape.

F is in a pretty good spot to start accumulating, though I haven't begun to buy it yet. I would be using Thursday's lows around $6.60 as my stop. This is one to be patient with as it consolidates. SBUX has a similar setup, but has not pulled back like F has. What will be a big yellow flag for the sustainability of the bulls is if we see stocks like F and SBUX fail to hold these breakouts.



Postions: long DFS August $12.50 puts, PALM November $12.50 calls, and $SPX index fund in 401k

F (Long)...

I like F as a long here. Like many of the recent picks, F broke out following earnings today of a multi-month base. And, like those other picks, I wouldn't be chasing it up here. I would like to see F fill today's gap on low volume and hold above the multi-month base. If it falls back into the base, we know it's not ready to go higher quite yet.



Position: none

Overview Thursday 22 July...

The bulls just would not be denied today. They squeezed the market higher on what really felt to me like panic buying. The action was absolutely frantic this morning and held up pretty well into the close. However, we are seeing some weakness in the aftermarket as some weak earnings are hitting in the tech world (MSFT and AMZN most notably). I'm looking for some weakness tomorrow. Markets like this are very hard to trade, as one debates whether to chase it higher or wait on the sidelines. Chasing hasn't ever really worked that well for me, so I tend to opt for the latter.

Short-term bias: bearish (we've had a very powerful rally the past few days, but I believe we will now be dragged lower, as today's action felt like panic buying by the bulls)

Intermediate-term bias: bearish (I still think this correction will take us lower, perhaps to 800 on the $SPX and I don't think we're ready to power higher quite yet)

Long-term bias: bullish (I believe we put in meaningful, long-term bottoms in March, and would use the aforementioned correction to increase long exposure)

Pick updates:

Apparently PALM wasn't ready to rally today. It hasn't done anything wrong technically aside from failing to follow the broader markets higher, which I view as a yellow flag.

DFS clawed higher, but I suspect it will fall tomorrow, as AXP has disappointed in the aftermarket tonight. I'm just looking for a chance to escape this position. I am not looking for a breakdown below established support in the $9 area.

DELL has set up a very nice short opportunity here. Note the inverted hammer it printed today. This is a show of weakness, which I suspect will continue tomorrow given the weak earnings after the close tonight in tech. $14 looks like a great stop loss level on a DELL short, though I did not pull the trigger today. Can you blame me? Trying to short the market lately has been a suicide mission. :-p I'm also liking the short setups in MDR, NOK, and FCX, both of which have tremendous downside from present levels and have fairly low-risk setups.



Postions: long DFS August $12.50 puts, PALM November $12.50 calls, and $SPX index fund in 401k

SBUX (Long)...

I don't drink the coffee, but with today's powerful move, I'll start drinking the Kool Aid from SBUX. They reported earnings and the market clearly liked what it saw. The bulls did not let up today, either, as the stock went out right at its highs for the day, a clear show of strength. I'm not going to chase this thing up here, but on a nice, low-volume pullback towards today's low (call it $16), I'll be looking to get long. I would expect it to need some time to consolidate today's big move, so I'll be patient here. However, if it falls below today's low, it will fill that gap and that will take the stock back into congestion, which would tell me the bulls aren't quite ready to run higher with it. I don't expect it to happen, but I would use today's low just under $16 as a stop loss.



Position: none

Overview Wednesday 22 July...

Not exactly the most exciting day in the markets today, and the indices finished pretty much flat. The melt-up in tech continues, as it's now up like a dozen straight days or something crazy like that. We had some mixed earnings in the financial sector today, something for bulls and bears alike. In the aftermarket, we have some mixed tech earnings, too. Tomorrow will be interesting, plus we have some more big reports coming up. On the whole, the bulls are still in charge, but I'm starting to see some cracks in their armour. And my instincts say we're not going to sustain this upside much longer, as earnings season will begin to wind down soon.

Short-term bias: bearish (we've had a very powerful rally the past few days, but I believe resistance will kick in and drag us lower, as the big range between 875 and 950 remains intact on the $SPX for now and we are at the upper end of that range now - we're trying to break higher, but it's not what I would call a 'clean break' higher)

Intermediate-term bias: bearish (I still think we have a correction that will take us lower, perhaps to 800 on the $SPX and I don't think we're ready to power higher quite yet)

Long-term bias: bullish (I believe we put in meaningful, long-term bottoms in March, and would use the aforementioned correction to increase long exposure)

Pick updates:

Let's try something new today. I'll just upload a pic of the watchlist from Stockcharts and comment as needed.

I am deleting BKC from the list, even though it didn't reach my target. It had a weak close today, and volume picked up on the downside. I suspect its oversold bounce is done for now. This was a quickie trade.

With the pullback this morning, PALM has now filled the gap from last month. It's been a gutwrenching pullback the past few days, but this gap fill is a bullish development and will clear the way for higher prices. If you're not in it, it's a very low-risk buy here as long as you have a stop below the 50-day EMA.

DFS continues higher, but volume is declining as it climbs up towards the previous resistance just over $11.50. I think resistance holds and the stock goes lower, but I do not at this time think the stock will break down. I'm looking to escape this busted bearish trade.

NOK appears to have found its footing and now looks ready to move a bit higher on an oversold bounce. This should set up a great short entry.



Postions: long DFS August $12.50 puts, PALM November $12.50 calls, and $SPX index fund in 401k

BAC (Watch)...

I'm adding BAC to the watchlist today. It's neither long nor short, but a stock to watch. With the reports of WFC and USB coming up tomorrow morning, I think it's a good time to be out of big financials. What interests in BAC is the volatility squeeze we're seeing. That's just a fancy way of saying that the price range is narrowing. We can see this by how the Bollinger Bands are tightening. We can also see it in how BAC is trading between the 50-day and 200-day EMAs, but they're converging on each other. The thing with volatility squeezes is they eventually yield volatility expansions. That's just a fancy way to say the price range will expand. But how do we know which direction the price will expand? We don't.

There are a few ways to play this. If you're trading short-term (a few days) you can play the range between the 50-day and 200-day EMAs, and if you're doing that, now's the time to buy. If you're trading intermediate-term (weeks or more), wait for the volatility squeeze to decisively resolve itself, then pick sides (if it goes above the 200-day EMA, buy, and if it goes below the 50-day EMA, short). Or we could do a complex options play called a strangle. When buying a strangle, you're betting on a volatility expansion, so you buy a call and a put. Since we're at the bottom of the range, I'll be looking to leg into the calls because they're cheaper right now, and when we rally, I'll look to leg into the puts because then the puts will be cheaper. I'll probably buy more calls than I otherwise would (or additional, but different calls) and sell them once BAC returns to the top of the range.



Position: none

Overview Tuesday 21 July...

It was a back and forth type of day. The bulls came out hot at the open, driving the $SPX to new highs, but the bears were able to knock them down midday, only to have the bulls rally us into the close to take the market to a slightly green day. It was a wild day, and tomorrow should be a wild one, too. We have AAPL, among others, reporting after the close (it's presently up a couple percent in the aftermarket), and we have some banks tomorrow (WFC and USB). This is a very easy market to get whipped around in, and it's almost nauseating in a way. The bears are actually trying to make a stand here, as they've been steamrolled for the past week plus.

Short-term bias: bearish (we've had a very powerful rally the past few days, but I believe resistance will kick in and drag us lower, as the big range between 875 and 950 remains intact on the $SPX for now and we are at the upper end of that range now, but we're trying to break higher)

Intermediate-term bias: bearish (I still think this correction will take us lower, perhaps to 800 on the $SPX and I don't think we're ready to power higher quite yet)

Long-term bias: bullish (I believe we put in meaningful, long-term bottoms in March, and would use the aforementioned correction to increase long exposure)

Pick updates:

Today was one of those days. Guess which stock on my watchlist was down the most. Yeah, it was PALM. No technical damage was done, but when one of your longs drops 5% in a day, it's always gutwrenching. If you're not already in it, now's a decent buying opportunity for a lower-risk entry. Even if $14 doesn't hold, I believe $13.50 will hold.

At least DFS went my way today. Not much, but it's a start. If you're not already short of it like I am, it looks like a decent short here.

RIG made a solid gap-up today, and did not fill it. This one could move later this week when SLB reports. ALVR, DELL, and FCX were also stronger than most today, each up a couple percent.

NOK continues to drift lower with no signs of a lift in sight. I think there will be a better short entry here in the coming days.

Pretty much all the others (AIG, BNI, BKC, BNI, CSX, CY, MDR, PPG, and SGR) were more or less flat today.

Postions: long DFS August $12.50 puts, PALM November $12.50 calls, and $SPX index fund in 401k

CY (Long)...

I'm going back to the tech well yet again and this time it's CY we're looking at. Tech is where a lot of the good charts are, so that's where we want to be, too, but not 100%. Anyway, CY reported earnings last week and there is a lot to like about this stock. It is sitting at all-time highs, having just recently eclipsed its Nasdaq bubble highs from 2000 or so (and there are many big-name tech stocks you can't say that about). This is actually very important because it means there is literally no overhead resistance from the past, meaning basically that the sky's the limit for CY.

In the more immediate term, I like the recent high-volume breakout to new highs that we saw last week. In the short term, I believe CY is too extended to prudently buy, but I view weakness in the stock as a great buying opportunity. Ideally, we would get a pullback towards previous resistance (the dashed purple line) to start a position, and I do expect this to happen. I think we will see another case of prior resistance becoming current support, but if not, further weakness, provided it is of the low-volume variety, would present an even better buying opportunity. Note how CY has consistently bounced off the 50-day EMA for the past several months. The bears won't have a chance to get their claws into this stock and drag it down until they can force it below that 50-day EMA, but make no mistake about it, the bulls are in charge here.



Position: none

Overview Monday 20 July...

Well, that options hangover did happen, but it lasted the whole of about an hour. We were strong right out of the gate today, faded in the morning, but then proceeded to rally hard into the close. We have some big reports coming up tonight and tomorrow morning, so we've got a lot of cross-currents at play here. Today was one of those days where we see some performance anxiety setting in. Since the market has run so far and so fast, there is a lot of chasing going on in the desperate bid to gain long exposure, as there is significant fear of being left behind.

It's not my style to chase these kinds of moves. I'm perfectly content to wait for the stocks I want to pull back and offer up lower-risk entries. They usually come back, and if not, I missed the trade. So what? It's not like there aren't thousands of other stocks out there or anything. :-p It's also not my style to aggressively short this kind of strength, despite the large number of shorts on my watchlist and my strong desire to get some shorts. DFS is painful enough, thank you very much. :-p

Short-term bias: bearish (we've had a very powerful rally the past few days, but I believe resistance will kick in and drag us lower, as the big range between 875 and 950 remains intact on the $SPX for now and we are at the upper end of that range now)

Intermediate-term bias: bearish (I still think this correction will take us lower, perhaps to 800 on the $SPX and I don't think we're ready to power higher quite yet)

Long-term bias: bullish (I believe we put in meaningful, long-term bottoms in March, and would use the aforementioned correction to increase long exposure)

Pick updates:

The bulls continue to take the market higher, and I'm not going to get in their way. So, ALVR, BKC, BNI, CSX, DELL, FCX, MDR, PPG, RIG, and SGR proceed to melt higher without me. We'll see some weakness eventually in these names, which will present a lower-risk short entry in the shorts and will begin to set up lower-risk buying opportunities for the longs.

AIG and NOK continue to struggle. I still believe both present good shorts, but AIG is still very volatile.

DFS keeps dragging me higher, kicking and screaming. This is what happens when you make a plan with a stop loss and you don't take your stop loss when it gets hit. Basically, I screwed up, and am now looking for a pullback to allow me to escape the position with less pain than I would've had if I had just taken my original stop loss.

PALM didn't do much today. I still like it on the long side and it's still buyable with a tight stop.

Postions: long DFS August $12.50 puts, PALM November $12.50 calls, and $SPX index fund and UTX in 401k

Lesson 1: Funds, Stocks, Performance, and the Investment Ladder

In Lesson 0, we discussed:

1. The stock market versus the economy
2. The stock market versus a market of stocks

In Lesson 1, we will discuss:

1. Active-managed mutual funds versus passively-managed index funds versus stock-picking
2. Absolute performance versus relative performance
3. The investment ladder and where stocks fall on it

So let's get going.

1. Active-managed mutual funds versus passively-managed index funds versus stock-picking

We need to break this up into two sections, first mutual funds versus index funds, then funds versus stocks.

Most actively-managed mutual funds actually fail to beat their index benchmarks (many use the $SPX), whereas passively-managed index funds typically replicate the exact performance of an index within a few basis points (for those non-versed in bond-speak, 100 basis points = 1%, so 1bp = 0.01%). I've heard from several source something like 2/3 of active funds fail to beat their index benchmarks. Plus, the active funds charge you much higher fees than the passive funds (typically 2-5x more). So, let me ask you this. Why in the world would you want to pay more for less performance? You're better off just buying passive funds versus active funds. If you don't have the time and/or desire to follow the markets closely, stick with index funds.

But that's not why you're reading my blog,and it's not why I'm writing. I believe picking individual stocks is more rewarding and less risky, though it is defnitely much more work. Look at 2008. If you were in all index funds, you were down probably about 40% (likely even more if you were in mutual funds). A decent active trader lost far less money last year, and the best were up last year (I was up last year).

Hedge funds are a whole other topic for another time.

2. Absolute performance versus relative performance

Relative performance is how well you do at something relative to some benchmark. Absolute performance is how well you actually do at said thing. So, if I was up say 10% last year and the market as we said was down 40%, then my absolute performance is +10%, but my relative performance is +50% (the difference between mine and the market).

I'm not a big believer in relative performance. I always laughed when I heard mutual fund managers say that you should give them your money because they only lost 30% last year while the rest of the market lost 40%. Sure, the manager had good relative performance, but a 30% loss is still a 30% loss. No matter how you try to rationalize it, you still have 30% less money than you did before the start of the year, and that's just not ok.

I believe absolute performance is what counts. But, on a trade-by-trade basis, this does not mean that all profitable trades were good trades and all losing trades were bad trades. This will be a deeper topic for another time.

3. The investment ladder and where stocks fall on it

This basically seeks to answer the question of what a share of stock actually represents. There's a certain hierarchy to investment in a company. This hierarchy is important because it establishes an order to investment in the company. The higher up the ladder you are, the more likely you are to get more of your money back. Basically, there are three major levels on this ladder.

On top are the actual business concerns. These would typically be say banks who lend to the company or other outstanding business-related liabilities. I'm not going to say much more about this level because that's not my level.

In the middle are the bondholders. I need to say a bit more here, but not too much more. See, a bond is basically a contract between the issuer (the company) and the lender (the bond investor) that has the lender loaning the company x dollars to be repaid by y date compounding at a z% annual rate. The company issues these through an investment bank. There are various classes of bonds with various special considerations, but this is the basic premise.

And on the bottom are the stockholders. Again, this is issued through an investment bank and there are several classes of stock, broken up into basically preferred stock at the higher end and common stock at the lower end. A share of stock is, in a manner of speaking, a share of ownership in the company, so shareholders get actual voting rights on corporate matters. Each share represents some percentage of the float (all the shares out in the market right now). Companies can 'retire' shares by buying them back on the open market (many do this because there is no better use for the money, they believe their stock is cheap, or because they want to improve performance - less shares outstanding means more earnings per share). Preferred stock tends to be less liquid, meaning there are less shares out there to trade, may have better voting rights, and tend to pay higher dividends than common stock (meaning they pay more money per share to the shareholder throughout the year). When you type in the ticker UTX to represent United Technologies, you are looking at the common stock, which is trading somewhere around $50 or so.

There is a fourth level of the ladder known as options, but these will be the topic of many later discussions. In a nutshell, an option is a contract that gives the holder of the contract the right to buy/sell (typically 100) shares of a company's common stock at a certain price by a certain date. The contracts with the right to buy are known as calls and the ones with the right to sell are known as puts, so the act of simply buying a call is a bullish play on a stock, but buying a put is bearish. Options are a derivative asset, meaning their value is calculated based upon some other asset. Since they involve shares of a company's common stock, they are a derivative asset of common stock. There's so much more to say about these, but I've said enough for today. :-p

In Lesson 2, we'll look at an introduction to the two basic methods of analyzing a stock, namely fundamental analysis and technical analysis. Just a simple overview of what they are and how they relate to one another.

Positions: long $SPX and UTX in 401k

Weekly Preview 20-24 July...

So last week was options expiration week. We saw a lot of wildly bullish action last week, but I do not expect that to continue this week. I would not be surprised to see a pretty weak open on Monday due to the options hangover effect. Given how bullish last week's action was, I would expect the hangover to be particularly nasty. Such a pullback would be a welcomed thing, I believe.

Earnings will continue to pour in this week, too. I use www.earnings.com as my source for earnings reports. These are very important to follow because they have a way of scrambling up the charts. I don't like being in stocks before they report earnings unless I am somehow hedged, be it through reducing my position size or some options action or whatever. I've come to view earnings as a very binary event, a coin flip, if you will. Loading up heavily one way betting on the outcome of a report AND the market's reaction is a very risky endeavour.

The same listing convention still applied. If it reports after the close Tuesday or before the open Wednesday or is shown as Wednesday with no given time, it is listed here as Tuesday. I've also listed the previous Friday's here, too.

I have bold-faced reports that could potentially affect present picks.

Friday: BRO, ETN, GAP, HAL, HAS, JCI, MBT, WFT

Monday: MDRX, BSX, CNI, LM, PKG, TXN, ZION, AKS, AAPL, BJS, BLK, CAT, CMA, CAL, RDY, DD, ELN, FRX, FCX, HCBK, JEF, LXK, LMT, MRK, EDU, BTU, PNR, PCP, DGX, RF, RHI, SGP, SHW, LUV, STT, SY, AMTD, KO, UAUA, UTX, UNH, WU

Tuesday: AMD, AMX, AMLN, BXP, CHRW, CHIC, CNH, GILD, ILMN, LLTC, NBR, PTV, QLGC, STX, SLM, SBUX, SYK, VFC, YHOO, APD, AAI, ATI, MO, BK, CKSW, DAL, DPZ, LLY, FFIV, GENZ, GSK, HST, ITW, ISRG, KEY, NITE, MS, NTRS, ODFL, OSTK, PEP, PFE, PJC, STJ, BA, SWK, USB, WFC, WHR,

Wednesday: ACL, DOX, BCR, CMG, CRUS, CTXS, CLB, CYMI, ETFC, EBAY, EFX, GGG, IRBT, KNX, LOGI, NTGR, NE, OSIP, PFCB, QCOM, RRC, SNDK, STLD, TCK, TEX, MOS, TQNT, TUP, VMW, MMM, ABB, ALK, T, BMY, BG, COG, CSH, CELG, CME, CIT, CBE, DHR, DO, EXP, EMC, ESV, EZPW, FITB, FLIR, F, GR, HERO, HBAN, RX, IGT, JNPR, KMB, LLL, LH, MAN, MCD, MJN, MNRO, NEM, NIHD, NOC, NUE, OXY, OMC, PM, POOL, POT, PFS, RMBS, RTN, RS, R, SWY, SIAL, SPAR, HOT, SNV, TIN, TRA, TNH, HSY, NYT, TMO, TRAD, UNP, UPS, LCC, GRA, WYE, XRX

Thursday: ARG, AMZN, AXP, AMP, BRCM, BUCY, BNI, CA, COF, CENX, CB, DECK, EMN, FII, IBKR, KLAC, LEG, WFR, MSCC, MSFT, TUNE, NFLX, NUVA, PMCS, RFMD, RVBD, SCSS, SIMG, STAR, CAKE, WGOV, ALEX, ASH, BIDU, BDK, EXC, FO, IR, LNCE, OXPS, SLB, SYT, TROW, ERIC, WL

Friday: ACV, ANR, BOH, BWP, CALM, GLW, EPD, HON, LO, SOHU, TLAB, VZ

Position: long UTX in 401k