Thursday, January 30, 2014

Shoot Out

The stock market had a nice rally today because of the following factors:

1 - Blowout earnings reports from FB & UA, plus great biotech news from ALXN. All made new highs on huge moves.

2 - A successful test of support by the major indexes yesterday.

3 - End of month markups by institutions. These markups may not happen tomorrow as the institutions play this dumb game of trying to hide the markups on the last day of the month from our sleeping SEC.

4 - Speculation on GOOG & AMZN earnings.

After the market closed, GOOG & CMG made new highs based upon their earnings and guidance. AMZN fell 25 points from its highs of the day. All three stocks had wild price swings before settling in on a price trend.

Here are charts of some of the leading stocks:


AAPL I opted to cover the last half of my AAPL pre open at $500.05. It looks like AAPL could hit its 200 day moving average around $475 - $480, but I chose to cover because the market was rallying and AAPL was losing downside momentum. When in doubt, get out!





ALXN popped on great earnings and drug news. I need to learn more about this stock. I don't want to chase instant lottery winners unless I know the story cold - especially in this uncertain market.



BIIB made a new high and I got back in. If the rally continues, I think BIIB can go to $125 - $130 on this leg



CMG broke out after the close on great earnings. Note how CMG just blasts through the highs without really completing a base. Very expensive stock, but blasts as the shorts get squeezed even in this environment.





CNQR Beautiful breakout, but how does one chase this stock in this nowhere market without learning the story? I have to get up to speed.




FB Great breakout on outstanding earnings report last night. Can FB continue to run like it did after it gapped up three months ago - circled on chart - from FB's first great upside surprise earnings beat? I am trying to hang on and bought some options into the morning dip. Unfortunately, the options rapidly lost premium during the day. That plus the slow erosion in price from the gap up, negated much of my gains from my stock purchase the night before. During the bull run last year, stock options held their premiums during extraordinary one to three day up moves.




GOOG No base and not great earnings. But under the surface, the market liked what it heard about business going forward. That plus FB seemed to be enough to make GOOG pop.




HAR keeps putting out great reports, but the last three reports resulted in one day wonder moves. Difficult to trade.




UA looks like it is kicking NKE's butt. Great earnings and after a consolidation it looks like it has a good chance to run into the next earnings report if the market rallies. I am having a hard time grasping the significance of UA. Is it just a garment company or really a technology company as Jim Cramer says? I have no answers. 

 
 
Here is the S&P 500 Tic Chart for the day. Note how after the gap up open, the index ended up going close to sideways the rest of the day. Then the SPY & QQQ sold off after the close.



In closing, the stock market has changed once again. All of a sudden there are some stocks blasting to new highs as the rest of the market lags. Are we going to get a market in gear with all stocks running, or is this just a bifurcated market? From my perch I view this as the latter until I see more evidence. I think that one has to pick one's shots until the overall market situation is clarified. Until then I still say "red light" unless one sees special situations. The fact that a bunch of stocks are running is positive. The fact that the averages are lagging, sentiment stinks and monetary policy is strange tells me to be cautious. Lastly, the violent nature of the moves of the select elite stocks is downright scary.






BIG Capital Advisors and Seaview Partners are not responsible for your investment decisions. We believe very strongly in our opinions, but you must perform your own due diligence in making your investment decisions.

Wednesday, January 29, 2014

Holding The Fort So Far

Today the bulls and the bears were engaged in a battle at support levels for the major indexes. It was quite a back and forth battle, with support slightly penetrated several times before finally holding and bouncing back a little bit.

The foreign currency crises and the Fed continued to dominate the action. Today it was Turkey that rattled the markets. In addition, the Fed decided to taper as expected. Lastly, FB reported great earnings after the close.

Here is the $SPX tic chart. As one can see, the index gapped down at the open, rose into the Fed announcement and then fell down to support after the Fed announcement. Then the aforementioned battle at support began with the bulls winning at least for today.



$SPX  One can see the support battle line more clearly on the one year chart. I am not so sure that this battle is over yet. Nevertheless, I covered my SPY short at 177.13 when it became apparent that support was holding today. I would not be surprised by a bounce attempt here. And I have set my price alert at today's lows as the point to reload my short position.




FB Facebook had blowout earnings after the close and broke out to an all time high. I waited to see how the conference call went because I view FB as a utility that is increasing it's earnings because of greater Advertising revenues - especially in the mobile area. My concern is whether subscriber growth is slowing even as FB is finally monetizing it's existing subscriber base for profits. There was no clear answer to the "FB is not cool anymore" issue during the call. I bought FB around $58.50 when it became apparent that the call was good and that the stock was breaking out.  I am keeping a tight stop on FB.



In other trading I covered one half of my AAPL short for a nice profit and will see how it does around the $500 level, which it pierced and bounced back from several times. AAPL does not trade in sync with the market, so maybe my cover was spooked by the fight by the indexes by support. We shall see soon if I was early, but it feels good to lock in some profits in the SPY and AAPL shorts.

In sum, this market still makes me skittish and I still want to pick my shots judiciously.  I am still playing small and will only go long special situations like FB. I am not going to get caught up in a buzz saw market until stocks start to act better. The Fed is sticking to tapering for now and we shall have to wait and see how the US economy and world currency and market situation plays out.


BIG Capital Advisors and Seaview Partners are not responsible for your investment decisions. We believe very strongly in our opinions, but you must perform your own due diligence in making your investment decisions.

Pre Fed Bounce

In my last post I showed how the S&P 500 was trying to bounce off support.





The market ended up with a decent plus day and the wise guys bought lots of futures right after the close in order to try to get some follow through with a gap up in the morning. Note how the market closed strong, but ended up no higher than the opening hour's high.
 
$SPX Day Tic Chart
 
 


Right now the $SPX futures are up 8.75 points in Globex trading. This after no special earnings reports from YHOO and T after the close. In YHOO's case it was Alibaba that unexpectedly disappointed. As for T there was nothing special. Yet the futures jumped anyway - circled on chart below. This looked like a rigged harness race at Monticello Raceway in New York. The one where the driver in the lead with 100 feet to the finish line, stands up and pulls back on the reins hard enough to choke the horse which then comes in last, while the last place horse comes out of nowhere to win the race. Everyone is in on the comical scam.

Needless to say, I am very skeptical of this bounce, given all that has happened so far this year. Also, as most people expected, The State Of The Union Address was non eventful.

$SPX 24 hour Tic Chart



It may sound counter intuitive, but many times before the results of the Fed meeting are announced, the market will rally. That is because it takes a relatively small amount of money for institutions or hedge funds to run the futures up and then sell stocks at higher prices into the news. All games, but effective. Most traders try to get flat before the news release thus creating a trading vacuum. vacuum.  That leaves it to the wolves to have some fun. And if the Fed news is good, they have gotten a head start on things. Let's see if the overnight futures hold and if the sharpies can pull this off again.

Despite the recent sell off, most sentiment indicators are nowhere. Thus, the $VIX, which I have show in the last few posts fell right back down.

$VIX




The only leading stock that made a new high was NFLX. Also the leading drug stocks looked good as BIIB, MRK and GILD all had good days and were all above their breakout points.

BIIB

 
MRK
 
 
 
 
GILD
 
 
 
 
 
 
NFLX
 
 
 
 
Lastly there was the AAPL short that I put on right after the earnings release Monday night. There is much controversy about AAPL these days. It all boils down to two factions.
 
1 -  The Carl Icahn argument citing huge earnings, an amazing stockpile of cash and a low PE multiple, a dividend, and so on. They want a larger stock buy back and so on
 
2 - Then there are the Moore's Law People. The cite increasing competition, slowing growth, huge size, a need for new innovative products, decreasing profit margins, disappointing unit sales, etc.
 
I believe that AAPL will not be a train wreck, but right now it has broken down on the charts and could possibly pull back to the first area of support at it's 200 day moving average.
 
Earnings and guidance were poor and the company appears to be floundering. In my opinion AAPL needs to spend its cash on changing it's business. Somehow they must keep the repetitive sales items from I-tunes and work their way out of the hardware business. At the same time they must start to spend money like GOOG does on innovation and buy complimentary businesses. In order to do this they need a leader with a vision. I do not believe that Tim Cook has that vision. He knows the AAPL business cold, but he cannot conceptually get to the next step. It's either that or bringing back Jack Welch to transform AAPL into a conglomerate like he did for GE years ago. If AAPL does not take the offense soon, it will become another huge growth company that slowly drifts like IBM and HPQ did while everyone talks about it.
 
AAPL
 
 
 


BIG Capital Advisors and Seaview Partners are not responsible for your investment decisions. We believe very strongly in our opinions, but you must perform your own due diligence in making your investment decisions.

Tuesday, January 28, 2014

SPOOs Trying Bounce Off Support

This morning the market is bouncing while AAPL cracks up. The rally appears strong, but lets see what happens after 10:30 AM when the opening thrust is typically faded. Will this bounce stick for a bit or will support be tested again?

AAPL



 
SPY
 
 
 
 
 
 
 

BIG Capital Advisors and Seaview Partners are not responsible for your investment decisions. We believe very strongly in our opinions, but you must perform your own due diligence in making your investment decisions.

It's Too Cold to Go Fishing

"Anita Venetian" Jesse Livermore's Yacht
 
 


Since 2014 began I have been saying to play small and when the market finally cracked I said to stay in cash or do some small very nimble trades. After a some good morning trades, I got emboldened only to then get cut up by many of those small trades. I learned the rules from hard knocks experience over the years, but its been so long since we had a bad tape that I needed a reminder.  Yesterday I got that reminder. I needed to touch the hot stove.

I day traded in small size, but still got beaten. The cause of my losses was the extreme lack of liquidity and choppy action of the market. The lack of liquidity put me in the position of trading individual stocks, and watching the bids or offers disappear as the stocks tanked or rallied - instantly evaporating my gains and turning them into losses.

For instance I would hit the sell button on a stock like CSIQ at $38.20 only to watch the stock instantly trade at $38.00. Ordinarily, I would have gotten out of my trade for a profit, but not in this skittish environment. Typical bear trend type of trading.



I love CSIQ as a company and believe it will do great this year. The much discussed possible hard landing in China will not affect the solar sector where CSIQ is a star and demand is supposed to keep on exploding upwards in China. But recently CSIQ got beaten up rightfully because of the market sell off, but wrongfully because of China. It may very well be in the buying zone, but I see no signs of a bottom in CSIQ and the market as of yet. .

There is a lesson to be learned here. That is to play very small, if at all. And to not over trade. Also most importantly, to stick to my game which is making money investing in momentum stocks in trending markets like we have enjoyed for the past 5 years. Right now there is no trend and my lack of patience cost me. Once bitten, twice shy. This is not the same market we experienced in 2013 and this tape clearly shows that I am not invincible anymore. Wake up call.

The main point is to do the thing that brought you to the dance, Day trading for the sake of day trading is not my bailiwick. Day trading when obvious opportunity appears is another story. So if we are in a trending market and a stock breaks out and whooshes to the point of being parabolic, then I typically take the opportunity to lock in the profits wait for a pull back and reenter the position if the stock starts to head back up.  I would call it opportunistic day trading. It is entering a trade as if it was a short term swing trade of several days or an intermediate term trade. If an opportunity to take advantage of an extreme dislocation comes along, thank the trading Gods and act upon it. If not, stick to your plan.

Some Examples:

1 - In the current tape, if the market has a nasty gap down after several downside days, that may be an opportunity to buy into a panic bottom.

2 - If the market has been down for some time and catches the shorts with a late day - say post  3PM rally - that may be a good opportunity. Note how the market rallied too early yesterday before collapsing again:




These are opportunities that I am always looking for, but rarely see. But they have happened several times over the years and resulted in great trades.

Does anyone know where Jesse Livermore docks his boat - above? We all know the story of how "Larry Livingstone" would fish for weeks on end until the market got better. It's too cold to go fishing and I'd probably bring a laptop on my boat if I did.

I shorted the SPY this morning and AAPL after the close last night on the earnings disappointment.



Unfortunately I covered my QQQ short prior to AAPL's earnings.  At least that was a logical cover prior to AAPL's earnings release. I fully expect to get squeezed at some point, but I think that I have to ignore the little wiggles - unless that opportunity to take advantage of a gift occurs. I will not stubbornly hold these shorts. I need to be flexible enough to look more at the bigger picture.





BIG Capital Advisors and Seaview Partners are not responsible for your investment decisions. We believe very strongly in our opinions, but you must perform your own due diligence in making your investment decisions.

Sunday, January 26, 2014

Stock Market Kerfuffle, Correction or Catastrophe?

 

"If it keep on rainin' the levee gonna break."
 

 Woops 




I don't know how bad this sell off will be. My gut is that it is number one or two above for now. But it doesn't matter in terms of how I feel about the duration of this stock market storm. My strategy is pretty much the same until things change. Its either red light or green light. For now it is red light. That means being in cash and day trading around this sell off.  I sold my remaining positions early during the day and covered my SPY short at the close.  I recommend to either sit on one's hands and wait for this to blow over, or for nimble traders: 

1 -Fade any long trades into strength. I would not be surprised by anything, including a big bounce tomorrow - intraday or possibly a positive day. The futures are flat right now, but who knows how they will be at the open tomorrow?

2 - Only  go long on very special situations and even then day trade them and only buy on dips after the regroup and start to head back up on the tic chart. Do not chase upside momentum or they will rip your heart out.

3 -  Short any market rallies when they start to roll over. My preferred vehicle is the $SPY or any major ETF.  Put options are OK for these vehicles since they trade in size with small spreads.

4 - Preserve capital. Scalp and don't get greedy. Fade the extremes. Sell the rips, buy the dips, and all the other trading platitudes are most important now.

Here are the facts as I see them:

Monetary Policy:

The shorts always have the best intellectual argument and right now they are in control. We are in uncharted territory as the Fed tries to wean us off its unprecedented QE policy. Short term we just don't know the implications of a late stage QE with tapering now in place. I have been posing the question of whether the economy is slowing and is the Fed taking away the punch bowl just as it is becoming clear that they are pushing on a string?  With a new Fed coming in, the economy an unknown. and with all kinds of international currency turmoil going on, the short term monetary situation is unclear. In addition, China may be having the hard landing that many have feared. On the opposite side of the coin, long term, the economy is still flush with QE money and the Fed is not going to stop the easy money conditions until things become clear. Thus despite the monthly temperature taking regarding tapering, in my view, this is going to be a drawn out affair. This is not Rock 'em sock 'em Paul Volker land. So call the Fed short term uncertain and risky.

Sentiment:

Investors are still too bullish, but at least some measures of sentiment are finally starting to show some fear. So still bearish, but at least starting to break the fever. To wit the $VIX finally moving up, with plenty more to go until we can say that the $VIX is high enough to show real fear. My gut is  that put call ratios, AD lines, McClellan Oscillators, etc. are in similar places. I inserted "resistance levels" where the $VIX has reversed in the past couple of years:




The Tape:

Short term break downs are all over the place. Long term is another story. The indexes and many stocks have broken some short term support zones, but there is a long way to go from some short term break downs to putting in a long term top. Here are some S&P 500 charts with different time frames. As one can see, one's opinion of the market all depends upon what perspective one is using to view the market:.


$SPX Short Term looks bad and cleanly broke short term support,




$SPX One Year looks like it is a bit short term toppy





$SPX Three Year looks like nothing but an extended healthy market that could pull back to some major up trend lines.





$SPY Five Year looks like a market that is way extended and could do lots of damage while still holding it's five year uptrend line.



So the tape stinks right now. Short term red light, long term lots of room to pull back before we call this Armageddon.

Make Your List Of Potential Buys & Don't Be A Hero

Whatever one's strategy is, now is the time to make a list of one's favorite stocks to buy when things turn back up. I am not a bottom fisher. Nor am I into Fibonacci retracements and all that. I think Fibonacci is total media nonsense. Leo "Fibonacci" never saw or traded a stock and nothing is preordained. Just see what the late Peter O'toole said:

http://www.youtube.com/watch?v=_EZCG2Ex8Q0

 




If one must bottom fish, I recommend using the lower Bollinger Band as a guide to where a strong relative strength stocks should pull back to in a healthy market. And whether this is a healthy market is up for debate.

My methodology is to wait for a good market and chase stocks or opportunistically buy great growth or story stocks that are bottoming. So I would see how my favorite stocks like CSIQ, GOOG, MONIF, PCLN and many others hold up. Some may fall by the wayside and some will hold up and possibly run early. Also, some new leaders may appear.What I don't want to do is try to be a hero and brag that I called the bottom. There will be plenty of time to get back in the game when things turn around.






BIG Capital Advisors and Seaview Partners are not responsible for your investment decisions. We believe very strongly in our opinions, but you must perform your own due diligence in making your investment decisions.

Friday, January 24, 2014

Market On The Ropes: Asian Contagion Trumps Manic Depression

The words of a dead paratrooper:

"Manic Depression's touching my soul,
I know what I want,
but I just don't know how to go about getting it."



The bumpy ride continues, but the bumps have started to intensify. This time the market is really on the ropes. Yesterday the market got whacked on news of financial turmoil in China. We don't know exactly what is going on in China, but something is amiss. So it was shoot first and ask questions later. This morning the Asian markets are all selling off and there is all kinds of talk about currency crises in Argentina and Turkey. Hence, the futures are down again. This looks like a chance for the markets to have another garden variety correction. Here are some charts of our major indexes:

S&P 500 one year: Extended and due to at least correct. Testing support at the bottom of the tight volatility squeeze today.



S&P 500 three years: Even more extended with decelerating power. 




NASDAQ 100 one year: The strongest of the indexes had popped out of its volatility squeeze to new highs and now appears ready to fall back.




NASDAQ 100 three years See S&P 500 three years.


 

NASDAQ Comp Tic Chart As one can see, the large cap Dow stocks got hit worst and came back the least during the late day bounce. In contrast the NASDAQ 100, the true index of innovation and growth, got hit the least and came back the most. Perhaps we can chalk this up to the new growth leaders being less susceptible to the negative affects of world wide economic havoc. Or maybe this is the beginning of something bigger and a sign of a market in denial, going down kicking and screaming.





$VIX Like most other measures of sentiment, the $VIX barely budged and is still saying that market players are not scared. This is not good.


 
 
I tightened my belt yesterday, narrowing my long exposure down to BIIB and RDN - plus a little BDSI after the close on an FDA approval. These stocks had better behave today or I will sell them too. I also made many day trades shorting $SPY, $NFLX, scalping post earnings release MSFT & covering my $IBM short into the open. I gave up one half of my IBM gains due to it's uncanny resilience. It was a battle to stay afloat as I pared down losses in what few other stocks I was holding.

We shall see how this gap down open fairs during the day. Will bottom fishers come in, or will sellers finally capitulate and break market support? In my opinion the market deserves to sell off for a while. A 4% - 7% correction is nothing new in this market run. Perhaps worse.

In sum, Its hard to short a market that has gapped down so far. Maybe the bottom fishers will try to save us again. In my opinion something seems different this time. Therefore, it is better to batten down the hatches until the storm is over. That means paring down core holdings and day trading as opportunities present themselves. I would hate to triage and let BIIB go, because it closed up so strong yesterday and looks like it is headed to $125 - $130. But I am fast and can get back in turning on a dime.

For longer term players that is another story, but don't buy into the healthy correction spiel
that the TV talking heads are spouting. Maybe its healthy for the market, but not for your wallet. And one just does not know how much damage can be done to your finances until this selling abates.







BIG Capital Advisors and Seaview Partners are not responsible for your investment decisions. We believe very strongly in our opinions, but you must perform your own due diligence in making your investment decisions.

Thursday, January 23, 2014

Pre Opening: Futures Down, NFLX & EBAY Up

Another day begins in the range bound stock market roller coaster. Today NFLX is gapping up huge  on last night's news of earnings, subscribers and possible pricing plans. EBAY is up on news of a Carl Icahn stake and demands to spin off Pay Pal. The S&P 500 futures are down and IBM will not go gently into that good night as it sells its server business to Lenovo. Here are some charts:

BIIB tried to follow through on Tuesday's breakout but was knocked back down. I'm trying to hold on. This morning BAX fell on news that BIIB's drugs are making big inroads on Baxter's Hemophilia drugs.



EBAY Carl Icahn green mail to the rescue?




IBM Got hit early yesterday but gave the shorts a battle closing strong. Lets see if it can take out yesterday's low and then major support. Will the sale to Lenovo make investors think that IBM is serious about turning things around? Or will investors want to see a new successful strategy? Still a tough short on a tight leash.



MDSO Clean breakout for this thinly traded stock


FB Fake Book pulled a fast one yesterday. An early morning breakout was orchestrated by some smart ass institution in order to create a high volume buying frenzy, into which the big money sold their position in size under cover. Touche! You got me. I bought in but sold immediately for a loss when it fell below the breakout point. I would rather take the small loss than wait for some artificial number like say the 8% or so that O'Neal says to use. I can always get back in and FB is back in the base, not busted. Set your price alert at yesterday's high.

 
 
NFLX Squeeze again. Will NFLX make and hold new highs as it gaps up and squeezes the shorts once again?




$SPX in tight volatility squeeze. Still range bound




BIG Capital Advisors and Seaview Partners are not responsible for your investment decisions. We believe very strongly in our opinions, but you must perform your own due diligence in making your investment decisions.

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