Thursday, May 28, 2009

TCM Notes : 5/28/09

  • Distribution day number 5 took place in the Nasdaq today, but it still closed above it's 200dma. Everybody else remained the same with : 4 for Dow, 3 for SP500, and 2 for NYSE. IBD says once you get 5 distribution days it's a level that historically marks a top. Well we'll see. It does make sense since the Nasdaq led the markets higher it can most certainly take us lower. Everything reversed on the lackluster auction on some 10yr Treasuries. 10yr yield stands at 3.72% now. Up some 17bp in the afternoon alone. So this is a problem for the Fed who is trying to get rates lower to help aid the housing market. There is no problem for those who have been holding strong and long on TBT. I've written about it several times and it filled it's 53 gap from back in November on Tuesday. I expect this thing to test it's all time highs at some point. Like all the other ultra shorts this one should have some massive violent move to the upside and that will be the end of it. Until that time.....the beat rolls on.
  • Keep those eyes focused on those retracement levels. These will be the best places to take a good risk/reward trade set up.
  • Almost forgot about Moody's. See how they backed off and reaffirmed the AAA rating of the US. They understand what the consequences would be if they cut that rating. Traders are still pushing short sales in the name as David Einhorn said in a conference yesterday that he's shorting the name. Of course Chanos was the early mover about 4 years ago on the name.

Wednesday, May 27, 2009

TCM Notes : 5/27/09

  • Tuesday's session put the market back in a confirmed uptrend according to IBD. Broad strength indicated institutional buying, but it was noted by Execution LLC that order flows are "slooooow" on the equities desk. He said this suggests that program buying by institutions is driving the rally, and that smaller traders/retail are not participating. I bought some more UYG at 3.76 on it's trend line after hours Friday (so I'm participating!.) 7% pop today on that to end above the 3.98 (23.6%) Fibonacci line. Market hasn't rolled over yet with the moving averages/retracements still providing support, so I'll continue to trade with the trend.
  • Glenn Rudebusch at the San Francisco Fed cited the Taylor Rule and said the fed funds rate could stay near 0% for years. Apparently this rule implies that the rate should be -5% by year end. This stuff is above my pay grade, but here it is if interested. Lack of accounting for real time data is the major flaw with this rule. As is the problem with most backward looking policy decisions. http://en.wikipedia.org/wiki/Taylor_rule
  • Getting back into the swing of things again.....getting caught up on reading was a nightmare but it's done now.
  • DBA has settled above it's 200dma for several sessions now as has MOO. And MOO continues on with the 50dma getting ready to cross up through the 200dma. This is known as a Golden Cross. And yes, it's bullish. Most professionals are using these two more now instead of the underlying futures and single company exposure to agriculture. Of course this type of lazy investing does provide opportunities for those that can stock pick. I'm somewhere in between at the moment.

Friday, May 22, 2009

TCM Notes : 5/22/09

  • Missed yesterday's post, but it would have said there was distribution in Wednesday's session. As for Thursday's it saw no distribution as the volume was too low. The fact that Standard & Poors would even try to jigger around with Britain's or quite frankly the US's AAA credit ratings is bold. So bold in fact it may just come back to haunt them if they roil the markets with their "assessments." Anyway, the count is 4 for the Dow and Nasdaq, 3 for the S&P 500, and 2 for the NYSE composite as far as selling goes. We still have major supports at retracements that would be appropriate buy levels as far as value is concerned. We'll revisit this after today's pre-holiday action. Don't forget that although this is selling it's low volume selling. SP500 still has ample support levels that a too heavy directional short trade may result in a major stop. The PPT pumping trades through Goldie and JP will blow out your stops if you don't time it just right. If Mr. Market shows us he wants to retest those lows then we wait. In the mean time we buy moving average and retracement level support. The 23.6% retracement has been good so far. It corresponds with a strong 5/4 gap up day. Around 882. It's right at the 200dma.
  • 2009 Rally TN Moto in Linden, TN. Wonder what this will be like. Team HTI running the 640 KTM.

Wednesday, May 20, 2009

TCM Notes : 5/20/09

  • Tuesday's action resulted in a doji on the session, and while that shows indecision another major development took place. It was the tightest intraday range of the year at .88%. And wouldn't you know it; traders are upset about it! The VIX trades below 30 now, and the same people that were complaining about the volatility are now complaining about the lack thereof. Traders have a short memory and are never satisfied. Hence the constant search for that new idea, and the immediate rejection of it if it does not perform instantly. Volume has been sited again in today's session as it came in lower than Monday's except for the Nasdaq. It's a pre-holiday week so the low volume is normal in my opinion. And might the volume assertions be flawed since they are being compared to a time frame when volatility was sky high and hedge fund managers were turning portfolios over weekly. Complete redemptions of many certainly attributed to higher volume flows. Might we be setting up for a low volume, low volatility, steady as she goes melt up? Remember 2006? And you know one could argue that the fundamentals may be better now than in that fraudulent period. Let's not get ahead of ourselves though. Things are still fragile at this point. However, we have moving average support underneath us in the form of the 9,20,50,and 86dma (in some cases the 150dma too.) The 200dma still remains above us as the major resistance. Nasdaq has been battling this average and again on Tuesday managed to close above it. Many continue to doubt this move, and many continue to say we are in a new bull market. While I want to believe the later; my trader's hat tells me that this will not be true until all indices are above their 200dma with many of those shorter term averages crossing up through the 200dma as well. In the meantime trade smart, and stay vigilant.
  • The dropping of those distributions days by IBD was clarified a little more by content editor Ken Shreve Monday. A function of time and percentage distance are the deciding metrics. The further we move away from a distribution day the less relevant it becomes. Also a move of 5% above the high of a distribution day warrants it as irrelevant moving forward. I knew time was one of the functions, and now it's nice to know the 5% formula.
  • BAC priced another 800m shares at 10$ after the close today. That brings the total to 1.25B shares now at an average of 10.77. This is a massive amount of dilution in my opinion, but the trading in the aftermarket reached highs of 11.50. It would not surprise me if many of these shares were being snapped up by those still scrambling to close out short positions. More than likely it's pension/mutual fund managers whom are underweight the name and can now get a full position without putting the market up against them while trying to accumulate.
  • TARP repayments will not be allowed until June 8th now. We shall see about that. The design for this next round of TARP PR will be to let those strong enough out in tranches. So we'll get the first week of JPM and GS paying back the money. Followed by another week of a few others, and so on and so forth. If done properly they could get a good four weeks of positive chatter from the pundits further helping to refresh public sentiment. The problem with that is the market will probably be much higher by the time the retail guy snaps out of the doubting phase, and they will most certainly come back in near the highs for the year. Happens like clockwork, and the boys on Wall and Broad know it.
  • Computer Software has been one of the hottest industry groups in the market recently. Just in time for the Solarwinds IPO. I think they go public today. Ticker SWI. Some of these names are getting stretched in their valuations, so it will be interesting to see if SWI marks the top for the space; or confirms a continuation of the trend. Their software is for network management. My personal IT geek has yet to get back to me with his thoughts on this company (ahem, Mr. T I'm referring to you sir!) For those in the know www.solarwinds.com and www.thwack.com can shed more light on the subject. Being the chart monkey I am I'll just let price and volume tell me if the crowd thinks it's worth anything.

Tuesday, May 19, 2009

TCM Notes : 5/19/09

  • Sell in May and go away, eh? Not so fast. Mr. Market is not done yet. We reclaimed the 9dma in all the indices. We'll need to make a higher high to truly recharge the uptrend, but Monday's action was encouraging. The Nasdaq closed above it's 200dma which had been offering resistance for several sessions. The one caveat : lower volume across the board. This hints at institutional money not widely participating. So there's that, but as Doug Kass points out pension funds are underweight equities and overweight fixed income. A re balance is in order and their buying power can push indices to higher highs. Moving forward we still have the moving averages and retracement levels underneath us for support. The trend still remains up, so trading with it remains to be the safest avenue.
  • Going through a few charts on some IBD names and THOR has been one that has been persistently on their screens for over a year. Looking at a daily chart you will not see the selling pattern emerging, but flipping over to a weekly chart you can see it. A huge Head & Shoulders pattern. It looks to have just put in the right shoulder of this pattern. Now many will say it's not a H&S pattern until it breaks the neckline. If you wait for that you miss all of the move in my opinion. Neckline looks to be about 22 to 24 depending on your interpretation of the pattern. Downside target could be as low as 16. Out of the money puts would be one way to go at this one. 31.20 would be the stop to the upside as a high above that would eliminate the pattern. With a PE of 61, P/B at 3.46, P/S at 5.02, Revenue of 300+m, and a market cap of 1.5B......this one is overvalued based on the same metrics of it's industry peers. Another catalyst that could make this materialize would be abandonment of THOR by IBD momentum chasers. They do it every time.
  • As noted in my twitter feed Monday, UYG traded back above it's 23.6% retracement level of 3.98. This level should provide support moving forward. It helps the cause that GS put BAC on their conviction buy list along with several other large banks that comprise the index. XLF, the proxy for UYG, is $1 away from it's 2oodma of 13.30. A move above that level puts 14.48 in play. For UYG to get to it's 200dma we would be looking for another 100% upside. This is entirely possible as stocks that fall over 80% have to make moves in excess of 400% just to get back to even. So don't be fooled by those that say, "but it's up over 200% from it's lows!" They're just pissed they didn't buy the low. Trust me because I'm one of them! Armageddon is not coming. Those that claim different are late to the party. Things are still messed up though, but the market looks past that.
  • AIPC did break it's neckline on a H&S pattern. Selling volume has picked up so this one could get down and potentially violate it's 150/200dma supports. 16.84 gap fill would be the ultimate target on that one. That might be a long shot though.
  • I'm ashamed I never mentioned QSII or CERN earlier in the year as a trade on digitizing medical records. Both are making breakouts again from higher levels. While those may be too lofty to chase two other names in this space could play a game of catch up. The "tide lifts all boats trade." MDRX and ECLP both look like decent weekly chart candidates. They are up against major resistance levels now, that if broken, could lead to several dollars of upside. Don't think it's worthy of a pairs trade by going short QSII or CERN because both look strong on a monthly chart.
  • Pivots for SPY, UYG, and SSO for Tuesday are : 90.38, 4.10, and 25.33.

Monday, May 18, 2009

TCM Notes : 5/18/09

  • It seems that two days came off the distribution count for indices. IBD dropped April 14 and April 22 from the count. This puts the Dow and Nasdaq back to 3, and the SP500 and NYSE composite go down to 2. The market outlook did not change though and remains as uptrend under pressure. We're still looking at our retracement levels for support.
  • Barron's cover story focused back on Treasuries again this weekend. Our TBT play was singled out again, but if one wanted more juice on this play TYO and TMV off 3x leverage on the 10yr and 30yr. These are new and are still lacking the volume of TBT, and have yet to form a major chart formation. Barron's is essentially looking for the yield on the 30yr to get to 5+% and the 10yr to reach 7.15% in the next year or so.
  • SemGroup is said to be coming back as a public company from chapter 11. Wouldn't it be funny if Goldman and JPM brought them back to market? You'll recall it was them opening up their books to the private equity guys that showed their weak cash position on their oil shorts in early 2008. The orchestrated squeeze to 147 wiped them out completely. As soon as Barclays took over their positions Goldman and JPM backed off, and then everyone went net short together. It's the stuff movies are made of.
  • Slow research weekend. It was enough just getting caught up on my reading. More to come as the week develops.
  • Weekly pivots for SPY, UYG, and SSO are : 89.66, 3.97, and 24.81.

Friday, May 15, 2009

TCM Notes : 5/15/09

  • The bearish engulfing pattern has played out thus far and is starting to take the wind out of the rally and the indices are finding themselves in between a 9dma and 20dma sandwich. While Thursday was an up day it came on lower volume and the indices resisted the 9dma to the upside. This doesn't necessarily concern me as much as it is confirming for me that a retrace is underway. The SP500 is approaching a 23.6% retrace (86.94 on SPY.) This could provide a nice level of support and offer a bounce, but I'm thinking it may be short lived. The level of dilution coming into many issues is causing hesitation now in the markets. Why buy now if you can buy lower? This is starting to replace the thought of "damn this market is running off without me!" We'll have to see how the market behaves Friday. If we can reclaim the 9dma to the upside that will be a bullish resumption to the upside and the 200dma. Failure to reclaim the 9dma and a violation of the 20dma to the downside is gonna embolden these bears to push hard to the downside making our retracement of 38.2 to 50% more likely. UYG is already approaching the 38.2% retracement, and since financials have a major influence on the markets direction I expect the SP500 to follow suit in whatever they do. That said the action in the financials was encouraging from a candle pattern perspective as I believe Thursday's action resulted in a piercing pattern. Mr. Market will tell us soon enough what he wants to do.
  • I promised myself recently that I would never touch another penny stock again, but damn if this one doesn't keep haunting me. I'm speaking of ZAGG.ob. This thing broke out from under a dollar and has trended higher on increasing volume and Thursday saw a 20% pop on 1.4m shares bringing it up to 4.56. The type of wide moves it's seen in the last 6 sessions I believe is indicative of big money cashing out. I haven't heard any chatter about it, but just by chance typed it in while going through charts tonight and was astonished to see it still moving higher. It's extended without a doubt, but you never know it may offer another trade set up if it pulls back into it's 20dma currently at 3.27. Scratch resistent invisibleSHIELD cover for smart phones. There was a similar "fad" stock like this that made protectors for the ipod when it came out. The ticker escapes me now, but rest assured it ended in a disaster. Most fad stocks do. Remember CROX?http://www.zagg.com/
  • Emini Monkey over at our sister site TickerMonkeys.blogspot.com has scalped his way to a 404% return ytd. Great job Emini Monkey! His goal for the year is a 1000% return, and he is well on his way. This is what staying focused, having daily/weekly/monthly/yearly goals, an eagle eye on the P&L, and eliminating losing trades immediately with a stop can do for you. Letting losers run does nothing but impairs your mental capital and distracts you from capitalizing on other opportunities that present themselves. There's an old trader's saw that goes : "if you take care of the losers, the winners will take care of themselves." So get out there and act like a monkey already!

Thursday, May 14, 2009

TCM Notes : 5/14/09


  • IBD has changed the market outlook to uptrend under pressure. Dow, SP500, and NYSE composite all saw distribution days Wednesday. Nasdaq avoided a distribution day as the volume was not higher than Tuesday. So the tally as it stands now : 5 for Dow, 4 for SP500 and Nasdaq, and 2 for NYSE. 3 to 5 in a few weeks is not a good sign, and with that they lowered their outlook to under pressure. We got into the 9 and 20dmas on many indices and their components today. The retrace is on as I noted in my twitter feed today. Doug Kass was on Squawk Box saying that he is net short at the moment, but he doesn't think we'll get a retest of the "generational lows" he proclaimed in March. More so he thinks a 10% correction is in order which would translate into 20% pullbacks for most equities. On most of the issues I'm looking at a 50% retracement would still correspond with support levels found at the 50 and 86dmas. We shall see.
  • Jim Simons' Renaissance might have contributed to some of those 90% up days in early April as they were apparently too skewed to the short side. To have money with Jim you've done something right in the world. I think his compounded annual return is 40% or so. However, based on today's Renfund call; performance is struggling so far this year. April / YTDSeries A:Onshore: -9.38% / -17.31%Offshore: -9.47% / -17.61% Series B:Onshore: -9.25% / -16.86%Offshore: -9.35% / -17.17% Series C:Onshore: -8.64% / -16.95%Offshore: -8.79% / -17.25% Series D:Onshore: -8.33% / -16.86%Offshore: -8.51% / -17.17% Returns are for continuing investors. I suspect these folks will be just fine as they were wealthy to start out, and have become filthy rich under Jim's quant empire. Never feel sorry for a rich man, so the saying goes.
  • "Respect and embrace the very normal 50-62% retracements that take prices back to major trends. If a trade is missed, wait patiently for the market to retrace. Far more often than not, retracements happen just as we are about to give up hope that they shall not." - John Mauldin
  • WRLD : Citron.com issued part 2 of their report on this one Wednesday. I think their target is ZERO which is quite the norm for what they go after. Their report is in the shared items section.
  • SAC Capital has gone in for 5.2% of TRA. TRA is resisting the hostile bid from CF who is also trying to fend off AGU itself. Consolidation is the theme in the fertilizer space. POT still remains the highest on the food chain.....pun intended.

Wednesday, May 13, 2009

TCM Notes : 5/13/09

  • According to IBD the Nasdaq chalked up another distribution day Tuesday. That brings the total to 4 for the Nasdaq. 3 of which have come within the last 6 sessions. It has also been struggling around it's 200dma recently. Dow remains at 4. SP500 at 3. NYSE composite at 1.
  • The mid 1970s stagflation scenario is starting to circulate around again as oil and gas have traded higher recently.
  • AIPC saw a heavy volume sell off today as it broke down through the neckline of a head and shoulders top. There's a gap between 16.84 and 18.50 it could potentially fill, but the 200dma rest at 21.37. It could see support at those levels.
  • Eliot Spitzer was on Rachel Maddow. He said, "Wall Street failed this nation." I'm sorry are we to listen to a man who has no integrity? I say greed and a complacent regulatory body failed this nation. I say the revolving door between boardrooms and Washington, D.C. failed this nation. I'm all for second chances, but give me a break. What's next is John Thain going to replace Bernanke as the next Fed chief? I swear sometimes the American public has a shorter memory than wall street traders. And that's saying something!
  • Secondaries and debt issuances are starting to put pressure on the market now. These guys are hitting the tape while there is interest to absorb it. This should serve to dilute earnings going forward, but it will at least alleviate worries about capital adequacy as we continue to navigate the uncharted waters. This coupled with a bit of a news vacuum could serve in giving us the retracement that so many would like to see. The 9 and 20dmas continue to offer strong levels of support.

Tuesday, May 12, 2009

TCM Notes : 5/12/09

  • Markets avoided another distribution day as the volume was lower than Friday's session by 20%. While we are now underneath the weekly pivots we remain above the 9dma and 20dma. We did have some bearish engulfing patterns emerge on the indices last Thursday and Friday, but we still have downside support in the moving averages. This week being an options expiration week makes it prone to weakness on the opening Monday (which we saw.) So we'll see how the market handles the low volume weakness going into Tuesday. If selling pressure picks up then we may get geared up for a 38 to 50% retracement of the recent up move. Mr. Market will let us know soon enough what he wants to do.
  • Ivar Kreuger is the subject of a new book called "The Match King." I didn't know about him, but apparently he was a master at accounting shenanigans. The stock market crash in 1929 and the depression which ensued blew him up financially. And then he blew himself away. http://en.wikipedia.org/wiki/Ivar_Kreuger
  • Meredith Whitney espoused her views on the floor of the NYSE with fellow haggard money honey Maria Bartiromo Monday. At about 2:15pm ct was when she said the banks still had "rotting assets." After that we made lower lows and settled near them at the close. I guess the day she gets long on financials the market will have another 90% up day. Perhaps she'll overstay her welcome on the downside, but while she talks about things being overvalued she's not brave enough to short. So she's telling us what we know already, and giving us nothing actionable except to watch the circus that she's becoming. If there were a stock correlating to her and Dr. Doom I would be short that issue today.
  • LFT tested it's 50dma again Monday and bounced to the upside hard to close .06 above it's 9dma. Tuesday's action will be key for this one to see if it's going to make a higher high, or roll over and consolidate into a base. Conversely YTEC has seen a slower more consolidated move. It could be forming a handle now. Buy point is 8.20. A break above that level with volume would signal to me that there is institutional interest again.
  • FRE and FNM may need another 92.2 billion by September 30. That's on top of the 78.8B they already took. Talk about winding these down is picking up.
  • An interview with Richard Clarida (in the shared items section) echoes my views earlier that the Fed may have to step up their treasury purchases. Investors are once again calling the bluff that the Fed can monetize all the debt coming out of the Treasury. However, investors shouldn't forget they are dealing with an entity that the balance sheet knows no limits. Hence the 9 trillion in off balance sheet items we don't even know about. Since they are trying to get the housing market jump started again any further hikes in the interest of 10 and 30yr notes could make them perhaps double if not triple their 300b of commitments to this space. For now TBT continues to work although it just resisted on it's 200dma. TLT is locked in a downtrend with every average acting as overhead resistance.
  • Short interest numbers are out and they did go down some, but not enough to write home about it. NYSE stands at 15.17b and Nasdaq stands at 6.46b. These numbers are from April 30th.
  • V : touching back on this one an SMB capital trader notes the 64 - 68 level as a consolidation zone. I didn't realize they had 17$ in cash though. Which is nice. This paperless trend is for real as I use nothing but my debit card to facilitate my purchases. Occasionally it causes a problem.
  • SSO and UYG are starting to fall victim to the bearish engulfing pattern. If the 9 and 20dmas can't support the pullback then a retrace to the 86dma could be in the cards. It will be incumbent upon us to be buyers at that level. All this said we still remain in an up channel.
  • Pete Najarian seems to think INTC's troubles are AMD's gains. AMD looks to have upside to 5.76 on a weekly chart.

Monday, May 11, 2009

100 RSS Feeds


Sometimes I wonder who's running who when it comes to my Google reader. Hands down though rss feeds have changed the game for me, and have allowed me to gather more actionable information than ever before. I try to only share the best of what I see for you. So just know if there's ever a day when there is no new post of my content..........the reader continues to ride on! The news never sleeps.


From your 100 subscriptions, over the last 30 days you read 34,199 items, starred 25 items, shared 260 items, and emailed 0 items.


Cue the balloons and confetti!

TCM Notes : 5/11/09

  • Research was uneventful this past weekend as rest and recuperation were at the top of the agenda. All the same things are being kicked around in the blogoshpere and the main stream financial media. Is this rally for real? Are we overbought? And several other second guessing titles with very little substance to the underlying text. Here's the thing that people fail to recognize. The market is a trend chaser by nature. That's why moving averages are so powerful. Their direction creates the trend, nurtures the trend, and thus carries the trend into levels that usually cause anguish to those trying to fight said trend. The 200dma is still above us, but the short term averages that I deem to have the most influence on directionality are still trending higher with power. The 9ema and 20ema. These are the two favorites of fund managers and prop traders alike. As long as the 9 stays above the 20 the push higher will continue. Most likely until the 200dma is tested. If we fail at the 200dma then the 9 and 20 will be critical support. If they can't absorb any selling pressure well then we may get a decent pullback. To short into any pullback you will need to see that 9 cross downward through the 20 in order to get some selling momentum. However, with so much money sidelined and now nervous about under performing there could be a hell of a downside fake out if the 9 and 20 converge. My eyes remain focused on these averages.
  • VIG was a name mentioned for a quality dividend etf.
  • One thing that I think the bulk of Johnny come lately bears have forgotten is that hedge funds move fast and mark to market by the second. With 1471 funds being liquidated last year and assets under management cut in half; perhaps the doomsday scenario of a market implosion are for sure gone. There is no doubt those liquidations exacerbated the overshoot to the downside. Especially when every prop desk and quant shop knew who was in trouble and what book they had to unload. Shorting ensued....prices collapsed further......funds were closed......positions were balanced........shorts covered, but some stayed a bit too long it seems. I say this because the break neck rally from the lows has been due to lots of short covering, and plenty of underinvestment by those waiting it out. Like a forest fire that rages through and takes out all the dead growth the hedge fund industry has cleansed itself (with no bailouts to be had.) Going forward less leverage and aum will lead those left standing to take a more cautious approach to investing/trading and more than likely place valuation ahead of flash. With regulation looming we may see these vilified participants pullback out of the spotlight. All they have to do is ride the trend being created by their mutual fund counterparts as they push money back into equities at an aggressive pace. The boys in Boston are pushing the trend at the moment, and it would be wise for partnerships to keep a low profile and trade with this trend. It is how they proliferated in the first place. Creating too much volatility, while it ultimately rewards the most astute and nimble, for the most part effects the industry as a whole in a negative manner.
  • USO has been getting attention lately as an inverted head and shoulder pattern candidate. I'll agree with that, and add that if 33.81 gets penetrated to the upside 39 is the target. Using the UCO a break above 10.38 would put 26 in play. The caveat : populist upheaval coupled with a "do good er" administration. I can hear it now : "I stand with the person filling up to commute to work....I don't stand with those speculating in crude oil and gasoline futures." And then a release from the SPR for good measure and voila.........deflationary pressure in crude. I can't see oil getting too pricey while we try to pull ourselves out of this mess. And those pressing too hard on the long side may very well find this out the hard way. If there's one take away from the first 100 days it's that your wings will be clipped if you try to fly too high. Paper barrels will be put in check as wet barrels will be the ultimate dictator of the supply/demand balance. As it once was in the past. Or so my thinking goes.
  • SPY weekly pivots:P=91.53/S1=89.93/S2=86.69/S3=81.85/R1=94.67/R2=96.37/R3=101.21. 86.97 (20) and 87.15 (9) should provide major support.

Thursday, May 7, 2009

TCM Notes : 5/8/09

  • Distribution day across the major indexes today. Puts the tally at 4 for the Dow, 3 for the SP500, 3 for the Nasdaq, and 1 for the NYSE composite. Despite this the moving averages still offer support underneath these indices as they continue to trend in an upward fashion.
  • Stress Test results finally in and it looks that we may have some gaping up action tomorrow as "only" 75 billion in additional capital is needed for half of the 19. Story is in the shared items section.
  • OCN a sub prime servicing company (mentioned in my 4/22 notes ) that has been anointed by the Obama administration had stellar earnings today and jumped 12%. They are tasked with modifying lots of loans. CEO stated that the 3rd quarter will show "significant revenues" from the Homeowner Affordability and Stability Plan. So if you're angry about these people getting bailed out. Get even. Get long some OCN.
  • SPY's pivot for tomorrow is 91.43 with S1 at 89.71 and R1 at 92.58. We are still way above the weekly pivot of 87.29. 25.87 pivot for SSO, and 4.33 pivot for UYG today.

Wednesday, May 6, 2009

TCM Notes : 5/7/09

  • Not much in the notes today as most themes I ran across today were the same ones discussed earlier.
  • BX, FIG, and KFN showed some topping out sell the news type of action today.
  • The strength in the banking sector was phenomenal today leading me to believe we may see some sell the news action. However, many names closed above their 200dma. So we'll see if there will be stress in the market after the official remarks tomorrow. Many banks have conference calls after the close tomorrow around 5:30pm ct.
  • Saw an article on my cnbc rss that said they need a new word for "green shoots." Thank heavens...it's about time.
  • A pullback is welcome at this juncture.
  • Mutual fund inflows are starting to slow down after 7 weeks of strong inflows.

Tuesday, May 5, 2009

TCM Notes : 5/6/09

  • All in all it was a nice day of consolidation yesterday. Volume was right in line with Monday to avoid any distribution. Tuesday's spinning top candle represents a little hesitation/indecision and should lead way to a bit of a pullback (PLEASE PULL BACK!) Uh, yeah......sorry about that, but that seems to be the view I'm seeing from a very liquid and ready to go (left behind?) sideline. To put all this in perspective Monday was also the 8th 90% up day since the March 9 lows. And that's pretty impressive. Speaks to the breadth of the rally, and the desire for risk amongst money managers now. Everything has been backstopped to the ump tenth degree so much so that one can't feel to scared to take a shot on the long side. The deafening, tunnel vision inducing beating we took all fall and winter though still haunts many, and emboldens others to continue in their pessimistic view of things. Well I've added a new average to my line up (150sma,) and looking at the SP500 and Dow it confirms for me that both of those (pullbacks on the way please!) are heading for their 200dma moving averages now.....not later. The news about the stress test should give us said pullback into some support at the major averages we've crossed up through. The scariest of which would break the regression channel we are in but would have the 86dma as support along with the 38.2% retracement level. 817-823 would be that level for the SP500. Even a 50% retracement would be 789. So Doug Kass may be right in his view of a generational bottom being reached back on March 9th. Bring on the pullbacks! Please?
  • A further sign of strength can be seen in the fact that 92% of the SP500 companies are above their 50dma. Unless of course you are hoping for a pullback then you may chide about how overbought we are. I can't argue with that logic either. There is a Bespoke snippet in the shared items to the right which speaks to this data point.
  • Keeping my eyes on the Chrysler situation. Cliff Asness of AQR penned a piece about the hostility towards the non-TARP participants in the debt structure. This situation speaks directly to the sanctity of a contract, bankruptcy laws, and a host of other things that several other authors will ink much, much more about as we speak. As Gasparino says, "this situation is fluid." The Asness piece is in the shared items section.
  • The GM story is equally messed up as they are now talking about a 1 for 100 reverse split. That's an old shell company/ penny stock tactic. Our government wouldn't pull the 'ol "pump and dump" tactic on us would they? Surely not those stand up characters!
  • An ambitious person would immediately form a company and call it American Collateral. The company would function as the nation's largest repo fleet. Operations in all states. Protecting the American tax payer's investment. The repo man would no longer be despised but deemed a patriot in the communities eyes. And those that would be so foolish as to fight with the repo man when he comes to claim what is ours. Well, that person would be charged with interfering with a federal manner. Repo man will now be a government position? Only in America baby! **I've heard nothing of this.....this was just a tangent my brain went off on when considering the nightmare these car companies have put us/themselves all in.
  • The Reserve Primary Fund has been brought up on fraud charges. You'll recall the whole breaking the buck fiasco shortly after they choked on 800m of Lehman debt Sep. 15, 2008. In the shared items section.
  • COW is a situation that has caught my eye. It tracks the DJ-AIG Livestock Index. Pork and Beef. I'm going to dub it the double hammer set up. And it goes like this: 4/27 was an exhaustion gap to the downside catalysed by the swine flu news breaking. The action of that day created a hammer candle formation and the low of 29.04 clearly serves as support and lends itself as the stop loss on this trade. I derive the double hammer from the fact that the weekly candle for that week resulted in a hammer as well. The body on that candle was a little large, but this is art not science so just stay with me here. The psychological profile of this trade lends itself to a sly contrarian play. The hammers are in the correct context as they showed themselves in a steep downtrend. Don't be confused though there is still risk, because this thing is still in a massive downtrend. That won't stop me from trying to pick the bottom though! We have a clear stop loss of 29. So judging by the all time highs of 50 that gives us .85 down and possibly 20.15 up. Which is nice.
  • Bernanke said to congress Tuesday that the economy would turn up later this year. Many others are starting to step out and say we may already be out of the recession. I can buy that because if you wait on the NBER and the masses to confirm that you'll be about a year too late.
  • And IBD said today was a distribution day for the Nasdaq......barely. One good thing is the Dow got to drop a day off it's count of 4. March 30 comes off leaving the Dow with 3 distribution days. And the SP500, Nasdaq, and NYSE composite stand with 2.
  • Most over used term now : Green shoots. If you are talking with someone and they use this term, or if you read this in another article.......run the other way. These people are followers, and the writings and ramblings of the pundits have filtered into their thought. To the point their thought has become unoriginal. Plus light at the end of the tunnel sounds so much more intriguing with a hint of danger. Green shoots growing in the light at the end of the tunnel......now I just may have something there! Beats the hell out of Kudlow's mustard seeds!

TCM Notes : 5/5/09

  • Traders are throwing darts now! With many equities nearing or closing above their 200dma risk is being accepted again by fund managers and prop traders alike. Yesterday's notes still apply.
  • XHB closed above the 200dma as pending home sales ticked up 3.2%. Many of the home builders that make up this etf are nearing or closing above their 200dma.
  • AAII is showing 36.09% Bullish, 20.20% Neutral, and 43.61% Bearish. When bullish sentiment reaches 40% or better I will be more concerned. For now it looks as though there are still some bears to squeeze.
  • BX, FIG, and KFN are still performing. KFN did a 30% move into the 85% I'm expecting. Looking for it to play catchup with the others and strike it's 200dma at 3.63. FIG closed above it's 200dma.
  • I must admit I messed up not mentioning KOL sooner. My thinking was coal was not ready to run and I thought it would revisit 15 again. Well apparently a call out of GS today for some coal names along with fresh fund interest has put coal in play now. KOL saw heavy volume as it neared it's 200dma today. ACI, BTU, MEE (conviction buy from GS), YZC, ANR, CLF,PCX, and others are running. Even JOYG is seeing strength. Many of KOL's components have not reached their 200dmas yet. As they do it should continue to push KOL to the upside. KOL has moving average support underneath it now. http://www.bloomberg.com/avp/avp.htm?N=tvtoday&clipSRC=http%3A%2F%2Fvideo-static.clipsyndicate.com%2Fcs-video%2Fvol2%2F2009%2F5%2F4%2F58%2F351%2F2ffb73ba-0c6b-46ab-87c5-7d1c28d4981b.flv
  • ELN was flagged today for unusual options activity. The May 7 calls were being snapped up. Neuroscience is the field in which they play. Biotech has been the target for takeovers as of late. Target for ELN is 9 to 12$ based on daily/ weekly resistance levels.
  • Towards the close yesterday we got an additional goose higher when AIG said they would need no new capital. Yes they lost money still, but signs that the black hole may be closing was encouraging to many. I'm not saying AIG and AVF are investable here, but their outlooks may be turning some.
  • YTEC got the volume needed to close above it's 200dma Monday. LFT is now #5 in the IBD 100 which tracks top growth stocks.
  • FXI closed above the 200dma today. Many think this is the best barometer on China shares, but truth be told it's more tilted towards Hong Kong listings.
  • INTC closed above it's 200dma on a daily chart today after MS raised their target to 19.
  • CENX is seeing call buying in May and June at the 7.50 strike. This is causing a rush of volume into the stock. If we can get through 7.50 that would put 17 into play. And possibly 24.
  • UYG closed above it's 86dma Monday. XLF is about 2$ away from it's 200dma. Stress Test results on Thursday. As of now rumors say 10 of the 19 need capital.
  • A point of hesitation for me now is the fact that you can throw a dart and find a winner at this point. Usually when you see even the worst of the worst rallying hard with all the quality stocks it marks a top in speculative euphoria. We're not going to try to pick a top based on that, but we will be aware that it's taking place.
  • As predicted the number of "Sell in May?.....No Way!" articles are starting to hit a fevered pitch. Not sure what to make of it. With the SP500 now positive for the year Uptick Fever may just melt the brains and potentially the wallets of some of these market commentators.

Monday, May 4, 2009

TCM Notes : 5/4/09

  • Keep your eyes on those moving averages. They have turned sharply in most sectors, and are offering trending opportunities in the other direction now. Nasdaq has led this rally, and it has now crossed back up through it's 200dma. This bodes well for other indices and their many individual sectors. Most of those have had short term average (9 and 20) crossovers, and even crossovers of the 50 and 86dma. Put simply : My price targets on most trades correspond with the 200dma now. Support levels are generally showing up at the 9,20,50, and 86 day moving averages as they rise up underneath the price moves now. Another technical thing that is happening comes out in the weekly charts. Many things are starting to get up through their 20dma in this time frame. With many exhibiting crossovers of the 9 up through the 20dma which indicates strength. This all simply translates into the intermediate direction the big money is pushing. And that direction would be UP right now. Trying to fade it remains futile and costly at this juncture.
  • X is starting to exhibit said strength after finishing up on a secondary. The 200dma for them is over 100% higher from these levels. 25.50 high volume capitulation on 4/29 may have marked it's lows for now. GS had them as a short in a pairs trade with AKS. AKS being the long. X does have a lot of exposure to the O&G industry, but with protectionism starting to creep in I can't imagine US Steel would not benefit. The default etf SLX has broken out on a daily heading to it's 200dma at 41.90. SLX is also on the verge of a 9ma / 20ma crossover on a weekly chart. So you got that going for you too.
  • Fed's TALF to take on CMBS paper. We knew this was coming. Barron's cover story was called "The Other Shoe." All about commercial re. Makes me want to go contrarian to them. While the pain is not over here I'm more prone to be a cautious buyer of quality names in this space even while they re-equitize themselves. RNP was a cef yielding 15% and discounted 15% to nav mentioned in the piece. The other pertinent fact was reit value has dropped from 400b to 160b with debt of 260b. 60% of equity is debt. Much more to come in this space. RNP looks like a $9 target could be achieved with support in the 4 to 5 zone.
  • "Mortimer.....we're back!" Nice intro for the private equity trade. Don't get me wrong they still face tremendous headwinds, but never underestimate their sneakiness. BX just closed above it's 200dma on Friday. FIG touched the 200dma and resisted. And rounding things out KFN has just bounced up on heavy volume and could see it's 200dma soon. And that would be good for an 85% move.
  • SPY and RSP continue to grind towards their 200dma. RSP is the equal weight, and it has seen massive volume inflows the last two months.
  • Agriculture is picking up steam. DAG, DBA, and MOO get you done in this space.
  • V looks like a better buy than MA. I wouldn't go so far as to suggest a pairs trade, but MA is hitting resistance on a weekly chart. Mid to high 50s on V could offer a nice long trade. Stop below 54.
  • TMA filed for bankruptcy. I can't believe they made it this long. Jumbo loans are hard to come by in a world of negative equity.
  • LFT has made a higher high after hitting it's 50dma for major support. This leads me to believe that YTEC could be in for a big move soon. Volume has been ultra thin to this point. Quant funds could target these two for a pairs trade soon, or just push YTEC as laggard catch up play. Making a directional bet without volume confirmation is speculation at it's finest!
  • XLE and XLV are seeing rotational inflows. I don't condone that though, but it could be warranted.
  • Looked hard at the Russell 2000 etfs. IWM is the beta 1, but we all know UWM is where the juice is. Ah, but the real juice lies in the TNA. If this rally continues the small caps should continue to perform. Moving averages set up favorably to the upside at the moment. UWM has a 26 target with support at 16. Stop at 14.
  • Growth has outperformed Value in this latest up move. So it would not surprise me to see Value gain some traction this quarter versus growth. IWN is the big liquid stall worth, but UVT is the thin volume double beta counterpart. Weekly volume has picked up in UVT since March.
  • HIG is seeing heavy call buying in the May 10 strike. Also, folks are selling the May 10 puts for .85. They would need a close above 9.15 for those to pay off. Bets are calling for more upside.

Friday, May 1, 2009

TCM Notes : 5/1/09

  • Higher volumes out of the indices today. IBD counted Thursday's action as distribution day 4 for the DJIA since it's March 12 follow through day. SP500 still stands at 2 with the Nasdaq remaining with 1. Other than that it was the best 2 months in 34 years. Nasdaq was up 12.4% for the month.
  • And the award for news story that resembles the beating of a dead horse......Chrysler filed for chapter 11 today. And Obama scolded the hedge funds that would not take whatever crap deal they were offering. What the hell were these funds doing buying Chrysler paper in the first place? With a market that is huge and global in it's reach.......you buy Chrysler debt? What were they thinking? And Bob Nardelli? Go away. How much shareholder wealth can you damage. Take your HD golden parachute and go away. Take John Thain and a bunch of others with you!
  • FLU PIG is a category 5 now. Wait a second. Maybe it's a level 5? Whatever it's at if it were an equity it would be considered "gone parabolic" at this point in time. And like all strong fads you just want to short it. Nothing like being in the host city of a world championship bbq festival when there is a potential pandemic popping off around the globe. You couldn't write a better story.
  • SQNM is another example of why we won't play with biotechs. Down 75.79% today. This one was at least fundamental, and a little fraudulent. Apparently some staffers "mishandled the testing results." As you can imagine the class action lawyers have begun to salivate. Again, these little biotechs while fast and sexy are lottery tickets and can leave you standing there with your pockets turned inside out in the click of a mouse.
  • Natty gas inventories are up 34% YoY. I accredit this to the obvious reduction in industrial output, but the new drilling methods have really changed the game for natty gas exploration. Think fracture stimulation. That market topped out exactly when Aubrey Mclendon of CHK uttered the words, "we are sitting on an ocean of natural gas."
  • BYD saw call buying today on top of the strength shown in other casino names on the heels of the MGM news.
  • Nasdaq and Russell 2000 about to either fail or take out the 200dma. This would put that level in play for all the others who aren't currently there. And for those that are claiming overbought levels. Only 30% of equities are above their 200dma. The market topped out well above 70% based on that metric. So we really could see a similar situation much like 1938. A 62% rally off the lows. We'll see soon enough.
  • Allen Stanford trying to turn himself in before he is formerly charged is the craziest thing I've heard. One theory I heard is his lawyer was trying to do this so when it does happen he will be considered a non-flight risk. Innocent until proven guilty, but that's a shady move. I think it was Harry Markopolis that tipped the SEC to this case. I remember in his testimony to the senate he mentioned that he could name a few other "baby Madoff's" for them. After that there was a day long meeting with him and the SEC. A little bit later, and we have the Stanford case. Coincidence? I think not.
  • SPY hit the 88.40 target and remains above it's weekly pivot of 85.57. Being a buyer of dips into the 9dma and 20dma is still the most prudent course action until proven wrong.