Holiday weekend appraoches while a close the month of may Econ Noise behind us.
I am sure longs are clearly fed up with the action and rather allocate energy in non-market realted activities.
Consider adding to shorts if the S&P breaks below its 200 day mva, setting off a panic. (more points on this attached below) Seeing a lot of oversold stocks once again, -- a usual behaviour following a signifigant sell off.
I continue to notice the stregth of low beta names especially in Meda/Adevertisment and Consumer Staples area.
Some names include OMC,TKLC, NCR , TKLC, INTU, CKR, and WMT --just to name a few.
Now high beta names remain oversold once again but no compllenig reason to rush to short or even accumulate at this point.
Stradegy: Slice the market in half between high and low beta. Trade high beta ; Invest in low beta.
Trade around beta postions with shorter-time frame by identifing quick exit/entry points. Mostly, trading bias on the short-side but avoid building intermidate-term postions in high beta names without fundemental catalyst.
Build long postions in attractive names in low beta areas. From 6-7 low beta groups indetify groups that are working and find the leader in that space.
50% trading, 50 % investing portfolio. short trades and long investments. As beta names become extremly oversold intermidate-term then we can change current stradegy.
Four questions to ask for portfolio postioning:
Long High Beta: 25%
Short High Beta: 25%
Long Low Beta: 50%
Short High Beta: 0%
Friday, May 26, 2006
Thursday, May 25, 2006
Long Trade in Tech and Deep Cyclics:
Long Trade in Tech and Deep Cyclics:
Tech:
NVDA : THQI, QSII, PALM- 200 day avg. (late recovery attempt)
Basic Materials.
FCX, at 200, NX-around 38 , GGB, around 200, TXI around 50 day...NUE-showing some life already.
Industrials:
EXP; IVAX around 20 support, ROK, HON, USG-towards 90.
Energy:
MVK, EOG at support of 60, SUN sp. 65, VLO abv 200 day.RDC around 200 day.
Tech:
NVDA : THQI, QSII, PALM- 200 day avg. (late recovery attempt)
Basic Materials.
FCX, at 200, NX-around 38 , GGB, around 200, TXI around 50 day...NUE-showing some life already.
Industrials:
EXP; IVAX around 20 support, ROK, HON, USG-towards 90.
Energy:
MVK, EOG at support of 60, SUN sp. 65, VLO abv 200 day.RDC around 200 day.
Wednesday, May 24, 2006
Selling pressure continues here....Econ data still awaits but overall tought to go long for a high risk buy.
Looking to short more in tech and commodity related sectors.
Discipline is so vital at this point.
A. Don't be suckered into daily buys. (as exhibited in recent days).
B. Coming back to the shorts on any recovery rally. (not forgetting the int-term/4 year cycle).
At this point long ideas should be low-beta:
Staples : GIS, CPB : attractive names as low beta defensive themes continues to be of high interest.
An if the stock market fails to be an attractive vice, perhaps consider other vices like Tobbaco, On-line gaming and Hotel/Casinos.
Beer Company: SAM- attractive chart, STZ: Beverage/wine spirit, and in Tobboca MO.-- Names to add to watchlist.
Healthcare: continue to favor pharma over most biotech at this point. SGP, BMY--low beta longs to consider.
Media: CCU: an attractive name in consumer cyclics as a defensive theme. (while XMSR is getting pounded, old school media might remain attractive in the near-term).
SOX: is below 2 staderd deviation might arouse some buyers but watch out for sell off in the am. But no need to jump in this buying oppertinity. Same can be said about Mid and Small Cap index.
Brokers: pumbled today as ET, SCHW contines a slide. Deep cyclicals continue the downslide and just worth avoiding as an investment and bet the house money for trades in that area.
Energy: rather avoid the attempted recovery buy. OSX trying to recover late-day with a resistance level at 205 range.
A Great Market prespective : John P. Hussman, Ph.D.
Similarly, market risk tends to be poorly rewarded when market valuations are rich and interest rates are rising. Since 1950, the S&P 500 has achieved total returns averaging just 3.50% annually during periods when the S&P 500 price/peak earnings ratio was above 15 and both 3-month T-bill yields and 10-year Treasury yields were above their levels of 6 months earlier. Again, there are a variety of ways to refine this result, but note that anytime the total return on the S&P 500 is less than risk-free interest rates, a hedged investment position increases overall returns (since hedging instruments are priced to include implied interest).
The "canonical" market peak typically features rich valuations, rising interest rates, often a reasonably extended and "flattish" period where, despite marginal new highs, momentum has gradually faded while internal divergences have widened, and finally, an abrupt reversal in leadership, from a preponderance of new highs over new lows (both generally large in number) to a preponderance of new lows over new highs, with the reversal often occurring over a period of just a week or two.
Looking to short more in tech and commodity related sectors.
Discipline is so vital at this point.
A. Don't be suckered into daily buys. (as exhibited in recent days).
B. Coming back to the shorts on any recovery rally. (not forgetting the int-term/4 year cycle).
At this point long ideas should be low-beta:
Staples : GIS, CPB : attractive names as low beta defensive themes continues to be of high interest.
An if the stock market fails to be an attractive vice, perhaps consider other vices like Tobbaco, On-line gaming and Hotel/Casinos.
Beer Company: SAM- attractive chart, STZ: Beverage/wine spirit, and in Tobboca MO.-- Names to add to watchlist.
Healthcare: continue to favor pharma over most biotech at this point. SGP, BMY--low beta longs to consider.
Media: CCU: an attractive name in consumer cyclics as a defensive theme. (while XMSR is getting pounded, old school media might remain attractive in the near-term).
SOX: is below 2 staderd deviation might arouse some buyers but watch out for sell off in the am. But no need to jump in this buying oppertinity. Same can be said about Mid and Small Cap index.
Brokers: pumbled today as ET, SCHW contines a slide. Deep cyclicals continue the downslide and just worth avoiding as an investment and bet the house money for trades in that area.
Energy: rather avoid the attempted recovery buy. OSX trying to recover late-day with a resistance level at 205 range.
A Great Market prespective : John P. Hussman, Ph.D.
Similarly, market risk tends to be poorly rewarded when market valuations are rich and interest rates are rising. Since 1950, the S&P 500 has achieved total returns averaging just 3.50% annually during periods when the S&P 500 price/peak earnings ratio was above 15 and both 3-month T-bill yields and 10-year Treasury yields were above their levels of 6 months earlier. Again, there are a variety of ways to refine this result, but note that anytime the total return on the S&P 500 is less than risk-free interest rates, a hedged investment position increases overall returns (since hedging instruments are priced to include implied interest).
The "canonical" market peak typically features rich valuations, rising interest rates, often a reasonably extended and "flattish" period where, despite marginal new highs, momentum has gradually faded while internal divergences have widened, and finally, an abrupt reversal in leadership, from a preponderance of new highs over new lows (both generally large in number) to a preponderance of new lows over new highs, with the reversal often occurring over a period of just a week or two.
QUESTIONS BUT NO ANSWER
Lacking answers plenty of Questions:
Rather confused by high volatility (as shown by the VIX index). Commodity markets making plenty of noise as the speculations continues.
No need to consider trading until late afternoon or even post econ data reaction.
1. Additional shorts to add specifically in tech?
2. Defensive theme long ideas in Staples and select Healthcare
3. Deep cyclical play the "recovery trade" vs stay on the sidelines.
4. Play more shorts in non-cyclic areas.
Things to contemplate and watch.
Where would it be worthwhile to play a recovery bounce: [TRADE]
Tech/Brokers vs Deep Cyclicals
Where should one be an aggressive short: [LONGER TERM]
Tech/brokers vs.. Deep Cyclicals.
Revisiting the homebuilder/reits.
Consumer discretionary area.
Where should one find "value" in being long: [QUARTERLY BETS]
Staples and very stock specific healthcare.
Staples: CPB, GIS -- as long candidates. Lower beta plays offering defensive strength.
Rather confused by high volatility (as shown by the VIX index). Commodity markets making plenty of noise as the speculations continues.
No need to consider trading until late afternoon or even post econ data reaction.
1. Additional shorts to add specifically in tech?
2. Defensive theme long ideas in Staples and select Healthcare
3. Deep cyclical play the "recovery trade" vs stay on the sidelines.
4. Play more shorts in non-cyclic areas.
Things to contemplate and watch.
Where would it be worthwhile to play a recovery bounce: [TRADE]
Tech/Brokers vs Deep Cyclicals
Where should one be an aggressive short: [LONGER TERM]
Tech/brokers vs.. Deep Cyclicals.
Revisiting the homebuilder/reits.
Consumer discretionary area.
Where should one find "value" in being long: [QUARTERLY BETS]
Staples and very stock specific healthcare.
Staples: CPB, GIS -- as long candidates. Lower beta plays offering defensive strength.
Tuesday, May 23, 2006
UGLY MARKET
Important to shorten your time frame and reduce positon sizes.
Brutal market with no room for error given the viloility.
Trying to come back to tech shorts here despite oversold levels.
Commodity related : Gold, Metals trying to show some life.-- but very unclear.
NOISE: Econ data friday, holiday weekend comming up as well as month end. Watch and see.
Brutal market with no room for error given the viloility.
Trying to come back to tech shorts here despite oversold levels.
Commodity related : Gold, Metals trying to show some life.-- but very unclear.
NOISE: Econ data friday, holiday weekend comming up as well as month end. Watch and see.
Some trading thoughts 5-23-2006
Not as timely to add to shorts: (although coming back to weak names is a worthwhile consideration). The last 10 days have produce a significant correction amongst market leaders.
S&P continues trading around 200 day mva, as we are reaching oversold territory in various momentum indicators.
Plenty of names reaching a daily buy. Notably the worst performers in the past two weeks might offer the best trading recover. (lead by deep cyclicals).
Put/Call Ratio: (since 5/12/06) Growing number of puts in the market. So fear continues to developed with growing volatility.
5/12/2006
1.27
5/15/2006
1.23
5/16/2006
1.01
5/17/2006
1.52
5/18/2006
1.22
5/19/2006
1.27
5/22/2006
1.21
Names to trade:
Tech trading long: WFR, NVDA and QCOM. -- Strictly trades at this point. (NVDA/WFR)- intermediate-term short candidates have corrected and can provide an upside beta.
Broker long: GS/SCHW: trading recovery/int-term shorts.
Commodity-related: GG/PD.
Not lose perspective: Intermediate-term weakness is not relived from bearish breakdown despite pending oversold bounce.
S&P continues trading around 200 day mva, as we are reaching oversold territory in various momentum indicators.
Plenty of names reaching a daily buy. Notably the worst performers in the past two weeks might offer the best trading recover. (lead by deep cyclicals).
Put/Call Ratio: (since 5/12/06) Growing number of puts in the market. So fear continues to developed with growing volatility.
5/12/2006
1.27
5/15/2006
1.23
5/16/2006
1.01
5/17/2006
1.52
5/18/2006
1.22
5/19/2006
1.27
5/22/2006
1.21
Names to trade:
Tech trading long: WFR, NVDA and QCOM. -- Strictly trades at this point. (NVDA/WFR)- intermediate-term short candidates have corrected and can provide an upside beta.
Broker long: GS/SCHW: trading recovery/int-term shorts.
Commodity-related: GG/PD.
Not lose perspective: Intermediate-term weakness is not relived from bearish breakdown despite pending oversold bounce.
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