Tech Ideas (pre-labor day week)

MSTR: Following recent recovery to $90- stock is overbought near-term

A short candidate at $90 exit at 92 closer to the 200 day mva. With reward levels 85, best case 80.

Despite price recovery from summer lows, intermediate-term downtrend in tact along with overbought daily momentum.

WFR: Quarterly recovery in recent trading action: (watch near-term behavior as a pullback name for Q$).

Looking for pullbacks at $33- chasing long trade here not timely, but FUNDI- support case. Q4 attractive set up.

NVDA: Like the intermediate-term but near-term short.

Trade: Short for pullbacks from 26-22.

Investment: Following pullbacks add for Q4 recovery corresponding with positive recent fundamentals.

BGC: a rare working momentum stock that has outperformed the market/sector.

Up over 160% since Q4 2006. (a cable play).

Looking for short here after recent highs of 39.50. (exit point)-

Reward: 50 day at 33.- any disappointment in this name is a valuable short play.

Defined exit of 39.50 helps manage the trade.

RBAK- use weakness to add – an idea for Q4.

Shopping for Q4.

Shopping for Q4.

Well, Homebuilders mentioned earlier. A decline in Sep can offer even a bigger recovery.

In the consumer discretionary space, homebuilders are the highest beta space.

Retail: Beaten up summarizes the story in Q2/Q3- but value traps are being set up in areas from stores to restaurants

Deep value search has to be justified with the Macro call. And currently not a timely trading short but a time too look for attempted bottoms or further downside extortion.

Regardless- an area of interest for Q4 rally especially higher beta names.

Follow up on credit shorts---

Credit Related: (Housing related stocks)

Barron’s: An article examining the “overdone” sell-off in housing. I like the discussion but rather wait into Q4. As a bear this sep/early October can be rewarding to short select groups. Although, I agree with waiting for strength in homebuilders give the extreme oversold conditions. Fundamentalists are certainly interested here and given the beta of some names like TOL-a strong recovery can help managers Alpha.

Negative Housing perhaps becoming too fashionable of a story on Wall St.

Homebuilders have corrected since August 2005 and have given up close to 40%+ of their value.

REITS: Mortgage Lenders are vulnerable but a tricky play in finding the right name in the group.

Some brokers have expanded to the mortgage business and remain a question mark.

LEH and BSC- remain shorts to consider on a timely fashion.

I am interested in LEH short in the near-term .

Trading Evaluation

• Did the trade's chart pattern conform to the criteria in our plan?

• Did the market as a whole support the direction of the trade we chose? (Every equity trader should have some clear rules about this in his or her trading plan, with a specific set of market criteria to cross-reference.)

• Were the precise entry requirements fully met, thereby legitimately triggering our participation in the trade? (I can't tell you how many students of mine confess to being overly anticipatory in their trading, entering a whole host of positions that never really triggered.)

• Did we hesitate once the entry requirements were met and then find ourselves chasing the trade?

• Did we use the proper position size for the trade, according to our rules?

• Did we locate our stop loss for the trade in the correct place?

• Did we obey the stop loss? (This is probably the most important issue of all. If we make too many errors in this department, we are bound for an early exit from our trading career.)

• Did we allow our position to fall (rise) all the way to the stop loss, or did we pre-empt it? (While this is not as serious as the issue above, there are traders who constantly eject themselves from perfectly good trades on the slightest hiccup, dramatically changing their overall trading odds.)

• Once the trade started to move in the desired direction, did we implement a trailing stop loss, and if so did we place it correctly?

• Were our targets for the trade chosen with a healthy reward-to-risk ratio in mind?

• Were those targets placed correctly based on support/resistance considerations?

• Did we hold the position all the way until we reached our targets, or did we take profits early?

• Did we add more position size once the trade was underway, either by averaging up or down? If so, was this allowed under our rules?

Dow Jones: Similarity 2002: (Mid-term Election Year)

Dow Jones: Similarity 2002: (Mid-term Election Year)

Amazing discovery in the chart patterns of the last Mid Term Elections.

After peaking in May 2002 and a failed recover in the summer, DJ Index topped on August 17, 2002. A major decline in Q3 02 setting the lows October in a Mid-Term presidential cycle.

Repeat? Easy to conclude from a recent historical observation but never hurts to recognize past performance.

Clearly just stating the similarity in seasonal patterns.

Don't let S&P 500 fool you

SPX:

Over 50 % of stocks in the S&P 500 Index are highly influenced by the top 50 Mega Cap.

A key detail to recognize when analyzing US markets. Looking at the RSP (S&P equally weighted index) one can observer the down trend

Defensive leadership and shift towards higher liquidity serve as reasonable for explain the S&P strength following a broad market correction on May 2006.

General Thoughts for today: 8-23-2006

General Thoughts for today:

Last week winners this weak shorts.- driven by oversold rally and a positive translation of CPI/PPI.

Two-three day rally from last week now offers attractive trading shorts as stocks hit key resistance levels.

More apparent in tech and retail.

Technology: QLGC, LRCX, WDC.- In Retail you have tgt, bby, etc.


In financials: Certainly the XBD

Aug 4 highs for the xbd as well. 219 level a very key res levelCan short all the way to 50 day ma of 208. A sideway mkt can make the short rather neutral but momentum still decling from overbought level.

Overall, would love to pile the shorts aggressively across the board but not that clearly defined yet. SPX: 1292- some gauge of support in the near-term.

Resitance Lev

SPX: has recovered 2/3 from its lows suggesting upside move reward is limited. While 1300 remains key resistance level especially with high reading in the open interest data.

1297 finish slightly below with option expatriation coming up. Rather short Friday and thesis seems back in gear.

Beta related themes: Have been deeply oversold and about 1/3 recovery from July lows. Example includes Russell Small Cap where less liquid names have underperformed.

Given that data, the sideway market action continues despite strong argument from bulls the past two days.

Markets remains oversold especially given the intermediate-term moment data. And near-term entry point is not that attractive.

SOX- has been so beaten up, potentially opening up an opportunity for an upside move back to the 200 day mva.
Same theme in OSX, other tech related themes, Small Cap- less liquid names and beta related themes.

Brokers and gold related themes looks attractive among the beta themes but will be looking for shorts.

Defensive themes:

Staples breaking out CPB, GIS, KR, SWY, K , CVS, WAG, PEP, CL, TAP, CSG and UST.

Banks pulling back but holding in for the most part.

Select Pharam: MRK, FRX, JNJ, KOSP, and ABT. PPH- continues its run.
Utilities continue to work in the near-term: DYN, WMB, AYE, AEP, CNP, CMS, D, EIX and ETR.Others include: FPL, PCG, SRP, RRI TXU and XEL.
Tech that stood out: BMC, ORCL, INTU, FISV.Media: not as strong and not clear if defensive. CMCSA and CVC- leading the pack.
Telco: CZN, TWTC, Q, and VZ- working. Other parts are mixed.

Mid August Gameplan

Time to press on credit related and broker shorts themes. NEW, CFC, TOL, FED, etc.

'Pound the table' on these shorts while the market continues its consolidating phase.

Begin to plan ahead for potential rate cuts in the upcoming winter.- An inverse behaviour of long/shorts in current state.

Two questions: Gold as shelter play and value bargains of US retail and technology names.

Soft landing economic expectations can be miscalculated. Truth yet to be realized while overall consensus has stuck to that story.

Overall, bearish view might have been triggered in thoughts of traders/mangers making it actionable.

Geopolitical tension can be an additional contributes to a slowdown in equities.

Finding Misplacing of overbought names is a difficult screen given correction since May. - Since amost groups have corrected

So shorting the weak is the right approach despite the beaten up levels and value trap is worth avoiding especially at this junction of the macro outlook.

Market timing is more critical than stock picking due to a cycle shift in markets. Rising oil prices, rate factors and weak economy. Housing and labor all contribute to grim periods ahead but markets think ahead so the timing of both has its disconnect. Elections can trigger a nationalistic moment of reflection which can lead to investor reactions.

Credit Risk- Market View - Great reads

Rates sensitive themes continue to struggle as continuation of the FOMC sentiment. Credit worry as long awaited is finally being recognized on wall street.

Downside move Led by homebuilders and mortgage lender weakness. CFC, LEND, TOL etc. Credit related themes continue to be at risk despite the positive analyst consensus on the street.

• Competition may get tougher. Wall Street firms, including Lehman Brothers Holdings Inc. and Bear Stearns Cos., are emerging as bigger rivals in home-mortgage lending, expanding beyond their business of creating and trading in mortgage securities. "They don't know anything about the mortgage business, which makes them a dangerous competitor," Mr. Mozilo said. These firms "have no hesitation about paying two or three times what we would pay personnel because they're used to the big bucks."--WSJ

• For years, it was surprising that higher energy and commodity prices didn't produce much overall inflation. That was because commodities make up less than 15% of costs to business. Labor costs were held in check. Now, the cost of labor per unit of output is rising faster than overall inflation. That squeezes profit margins and puts pressure on companies to raise prices.

• S&P: 1250-1280 range continues to be a level to watch in the near-term: overall daily extended and due for further pullbacks. Weekly oversold indicator is not working and in danger of falling back to negative territory.
• Beta index showing that an additional downside move is needed before a change in sentiment.
• Gold: see further downside move: GLD closer to 62 level.
• Rates: 10 year attempting to hold 4.87%.
• Crude: 77.95 resistances.
• Financials continue to offer plenty of shorting opportunity. Continuing shorts on banks/brokers : MS, SCHW, AMTD- shorts here.
• Search for value names in deeply oversold areas but not a timely entry point.
• Defensive names might offer shelter but not a sure bet.
• Soft commodities a theme worth revisiting.

A great conclusion from Financialsense.com: http://www.financialsense.com/Market/barbera/2006/0808.html

History strongly suggests that while Energy stocks, Utility stocks and Consumer Household Product “Staple” Stocks can be defensive at various times there are a few concepts that stand out. They are:

1. During the course of most bear markets, the end stages of a bear where there is panic, liquidation can take these groups down very harshly causing them to give back a good deal of the defensive gains they may have accrued during the broader equity bear market. In essence, if a bear market continues for too long a period of time, as in the 1973 to 1974 and 2000-2002 bear markets, these stocks have a tendency to give up the ghost and succumb to the selling pressures in the final stages of the bear.

2. If one of these groups is deeply depressed going into a bear market and has for several months or years been out of sync with the broad market (underperforming) there is a good chance it will shine in a down market and live up to its defensive potential.

3. Ultra-tight Fed policy and very high real rates makes it almost impossible for any of these groups to perform well, so at some point, the switch from defensive names to cash is necessary if the Fed appears intent on strangling the economy.

4. None of these groups really holds up well in a crash, with the possible exception of Utility stocks, which in years prior had big dividends. Today, the new equivalent might be the Energy Trusts which frequently sport ultra-high dividend yields as many utilities now only pay mediocre returns.

5. Gold Stocks tend to have the strongest non-correlation to the market but will only hold up and perform well if the price of gold itself is gaining momentum and showing tenacity in the face of whatever economic event is driving the bear market. If Gold rolls over, the Gold Stocks can very quickly turn into a high risk proposition and can very quickly give back accumulated gains.

Big Picture Thoughts and FOMC Trades

Watch for names that rallied on decling volume
Indexes appraching resitance level from July highs
Short-term momentum indicators remain overbought.Despite postive indcation from the weekly momentum, not convicend on the sustainablity of the run.

FOMC: Trading Ideas:

Long QQQQ around 2pm/ Short RKH at 3-3:30pm.

Nasdaq too beaten up/ Banks extended : Pair Trade.

Watch for names that rallied on decling volume
Indexes appraching resitance level from July highs
Short-term momentum indicators remain overbought.Despite postive indcation from the weekly momentum, not convicend on the sustainablity of the run.

FOMC: Trading Ideas:

Long QQQQ around 2pm/ Short RKH at 3-3:30pm.

Banks

Short lived rally! And like the view of selling into strength.
BKX: Daily momentum appears to be extended. Following a 10-12% upside move since Q4 2005, this is not an attractive risk/reward point. At least not favorable odds for a timely entry point.
Watch a key resistance level on the bkx of may highs at 113.73 on May 8. Even a breakout above that level further extended recent rally which started on Oct 2005.
I know one should not fight the fed, but the news appears to be discounted and rather a non-event.Risk: Defensive themes in the markets have been working and on a relative basis banks might not be as a bad on pullbacks

Ahead of the FED

Well, FOMC meeting ahead: My mind and gut tell me "it is all noise nothing new" while plenty of the outcome appears to be discounted..Near-term fools can swim in the volatility of markets but in the post noise era I will be revisiting the shorts.Would continue to short beta themes: OSX, HUI, XBD and even SOX selectively. If long only manager accumulate defensive themes; pharma, telco, utilities etc....If an absolute return guy, i would be highly stock specific or just focus on shorts.Wait 3 months before considering longs as history has shown. Generally, markets should rally 3 months following the last rate hike. --

Quick Long Thoughts-- (if any)

Stocks of Interest:

AMT/CCI: any upcoming catalyst for these names following recent run. Positive daily momentum remains in tact for these names.

Both above 50 and 200 day showing signs of leadership but attractive buys on pullbacks.

GPRO: consolidating in the $50-54 range. Momentum upturn.

DNA: trying to form a bottom within the range of $78-80. A better buy closer to 78 a longer-term buy idea worth waiting for a breakout with exit slightly below $78.

ATRS: clearly a strong run recently, a name worth revisiting on pullbacks. Bottoming intermediate-term any pullbacks near 18 level can offer a buying opportunity.

GOLD YEILD and MARKETS

10 year Yield: after peaking on jun 28 further declines continue, while next support remains at 4.94.

Gold: 600 supports – appears extended versus other moving averages.

SPX: 1240-1280 range remains key following sell off from May highs. 1280 can continue to serve as a resistance level

One question:

One question:

A. Mkt rally starts now and continues further into labor day.
B. Mkt rally fails now and then recovers in 2.5 weeks
C. Mkt rally works now and then fails 2.5 weeks later.
D. Sideways...sideways....up/down...sideways.- just sideways.
E. None of the above too volatile.
F. I don't care leave me the F*** alone.

Strategy Summary:

Expect continued market volatility as the rest of earnings and FOMC meeting 2.5 weeks from now

Near-term momentum becoming oversold creating a high-risk trading opportunity of higher beta names—(with a cautious approach to news sensitive names).
OSX , HUI and XBD- areas to explore.

Shelter for uncertainty: Attempt to accumulate defensive leadership stocks on any near-term pullbacks.

AES, AYE, TXU, OKE, PPL, FE, CVS, KR, SWY, CBP, AZN, MRK, SGP, BMY, INTU, CMI and UTX--- few names to watch for on pullbacks.

Looking beyond two weeks: Position out of speculative trading names and take a defensive / cash stance on portfolio especially ahead of FOMC meeting.

market outlook: last week of july 06

Market Outlook:

• Earnings will create a boom/bust response adding to volatility but already a negative start but heavily stock specific.
• Markets are becoming oversold making shorts here not as timely....but macro effects here can create distracting noise.
  
• Rather trade in near-term here than making investments....use pending strength to trim out of long positions.

CBH: a short worth revisiting following a recovery around 200 day mva. Overall, short on any strength despite oversold levels.

AFL/AIG: appear to be a similar theme like HMO's where attempted recovery from weakness YTD: performance.

AFL reporting on tuesday- oversold here to be shorted heavily but a negative bias market is a tough call here.



The defensive themes:

DJ: decline back to 35 level, monthly key support worth taking a shot.Still awaiting to consider the value bet in traditional media names.

PPH - worth a revisit and run all names in the index. Again BMY/SGP of interst here before earnings. Plenty of pharma names.

utilities strength continues along with staples as the defensive relative leadership remains in tact. Not convinced to jump on this train as a long idea. But curious on pharma as the defensive theme.

10 year yield: correcting in the near-term while weekly suggest further downside....perhaps around 5%.
Gold: appears to be extended in the near-tem, further downside potntial with support around 600 level.
DXY: attempting to bottom
Crude: looking for correction closer to 70 level. following recent highs of 77. momentum suggesting

currency notes and things to watch for:

The upside risks to inflation are clear but at the same time, so are the risks that the economy faces. The next FOMC meeting is scheduled for August 8th, which is only 2.5 weeks away. This means that the short list of economic releases between now and then will not only be even more important for traders to watch, but could also bring about more volatility. This includes the personal consumption expenditures index and the Q2 employment cost index, which will shed more light on the inflation outlook along with consumer confidence, durable goods, advance Q2 GDP, ISM and Non-Farm payrolls.