Knuckleballer On The Mound

Yesterday's gap and fade open followed by another down day for the indexes gave little opportunity for investors to make profits unless they were patient and selective. Many of the stocks on my list of set ups, like the airlines, failed to pop and many early gainers were designed to make you swing at a pitch in the dirt.

The investment community is now back to work and so far the market is very skittish as it works off it's overbought condition and some group rotation occurs. My trading thesis is to fade any gap ups, have patience, be selective in waiting for my pitch and take my profits quickly.

For example, SCTY was up huge at the open after Goldman Sachs upgraded the stock to a "conviction buy." and raised the price target to $80.00. SCTY appeared to be breaking out. But it then proceeded to fade with the market averages. The key to buying a gap up stock like SCTY is to wait for the market fade to end and to then wait for the stock to reverse back up. In the case of SCTY, the stock never came back and faded all day. Hence, the wise play was to not buy SCTY. Plus it did not breakout on a closing basis.

And after gapping up, the market ended on a low despite the half hearted attempt to bounce during the day. I'll use the Dow Jones Industrials as an example because I can't get my hands on the more accurate S&P 500 tic chart. I also watch the NASDAQ 100 tic chart along with.

 

 

I did buy some selected special situations, such as WDAY which broke out from a beautiful base to an all time high. But I played small and will sell faster than I would typically do until this market begins to sort itself out.

That means that I will sell my CSIQ on today's gap up open and then look to buy it back hopefully on a pull back. I also will sell the GOOG I purchased and try not to regret the stocks like BABY that I passed on because of the erratic nature of the day. Until things settle down into a pattern, it is strictly a traders market for me. Lastly, that means that I may buy stocks like GOOG right back later in the day taking whatever the market gives me.


 

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.

Asset Allocations Continue. Wall Street Comes Back From Vacation This Week

A strange market indeed. January Second most stocks go down as a selected few groups go up. January Third, the Dow goes up, but the NASDAQ 100 goes down as more asset allocations occur. On Monday the bulk of vacationers come back to Wall Street, so volume will probably pick up and more allocations and new year jockeying will continue. It is still a time to play fast and small as things begin to sort themselves out.

Our stocks are off to a great start with solar stocks  like CSIQ and banks like BAC being the stars:

CSIQ  Although the solar stocks are running, CSIQ is the only major solar in new high territory. Up huge on the week. I intend to trade around a core position.

BAC  Maybe not the best bank - I leave that to WFC and JPM - but is easy to trade  in size under cover of huge volume and without the government demagogues trying to kill a great man like Jamie Diamond and JPM. I intend to buy on dips and trade around a core position

 

 

PLUG I dumped PLUG into Monday's strength. Other than January effect and day traders piling on, I don't see anything great yet. It may go higher, but I am skittish as the new year begins and want to grab my profits fast. But I will continue to monitor it.

Friday the Airlines joined the group strength party. The thesis being that industry consolidation and a la carte pricing are the catalysts. Can my most hated group in history really have the wind at it's back? Friday looked like the first day of the next leg up for the group.

DAL Popped one resistance level within the base and going for a breakout

JBLU Same basic premise as DAL

LUV Clean breakout

SAVE Looks like it's breaking out. Sell when they charge you extra to go to the bathroom.

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.

Day One Tax Selling, Asset Reallocations, Disconnects

Today the chickens came home to roost for all those 2013 high flyers that were not sold prior to the new year. Many parabolic stocks finally sold off as people who deferred tax selling into 2014, finally pulled the sell trigger. At the same time, some groups of stocks ran up in the face of today's market sell off, giving new meaning to the term correlation.

There was no correlation with the indexes when it came to solar stocks, banks, and some special situations. In my old hedge fund days we would blast out a huge chunk of stocks into the face of any sell programs. Then just about all stocks would move up and down with the indexes. My eyes would be glued to the SPOOs tic chart on my Bloomberg terminal and I would be able to capitalize on market correlation in a much greater way than today.  Just look at these stocks that traded as if there was no the sell off:

BAC Bank of America broke out to a new high today. Volume was huge. I grabbed it in anticipation of the breakout in early strength today. Hopefully this one is a keeper for a swing trade of several days. All the banks were running today.

CSIQ Canadian solar is the crème de la crème of solar stocks which were all on fire today. I have traded CSIQ all the way up in 2013 and was chomping at the bit to buy it back as it formed a nice consolidation over the past 7 weeks. I mentioned CSIQ a few times last week and today it finally popped big time. A great breakout on high volume with strong relative strength. I grabbed it early in the day today and kept adding to my position as it took out important resistance levels on the chart. Text book gorgeous breakout. One of my faves.

PLUG A special small cap low priced situation. It barely broke out today on some company guidance and I'll hopefully sell it into strength tomorrow.  Strictly a quick trade.

IBM is not my ideal short, so I passed on it. But if you are a believer in the IBM death story, today may have been a good entry point. IBM may be rolling over here after giving the shorts fits.

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.

Some Chart Set Ups

Set your price alerts at the indicated breakout points



AOS Close

BCOR Nice setup

CLB Core Labs is an oil industry must for all drillers

DAL  The economics are in the airlines favor for now as they consolidate. But beware energy prices.

 

GILD   Great Biotech right there but wait.

IBM I'm no IBM bull and recognize the short call. But Warren Buffett and share buybacks will make this a tough one. Plus despite the bad record, management may wake up. Battleground stock.

JCI Another nice set up






MDSO

PCLN Low priced (yes) growth champ

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.

New Year Thoughts

Its a time for some reflection at the start of a new year for investors and traders. I always try to think about what would the late great Marty Zweig say about the state of the market. I don't have Zweigs's sophisticated models or historical examples of what happened when or if the combination of these conditions existed, but I think I get the gist of the situation so here are some thoughts:

1 - Monetary Policy

The Fed is still on the bull's side, but slightly less so.  All the Fed pumping these past several years has been based upon a deflationary thesis in order to avoid the USA and world economies from becoming the equivalent of post 1989 Japan or the post 1937 USA. It appears that the Fed cautiously believes that their approach is working and that the economy can slowly begin to walk by itself as the Fed weans us off of QE. IMO, the gist of the Fed's policy is to view the economy and monetary policy like two weights on a see saw. The more the economy rises on one side of the see saw, the less QE weight will be used on the other side of the see saw. In theory this will go on until eventually monetary policy can get back in gear with historic long term money supply growth norms and non or slightly inflationary interest rate norms.

Score one for the bulls. Stimulus may not be as powerful as before, but it still is a bullish scenario. It certainly is nowhere near an Edson Gould "three steps and a stumble" moment or a Paul Volker pull back on the reigns and choke the horse tightening jolt. So every day we will listen to everyone, including the new open Fed itself,  talking about the Fed, short term rates, the yield curve and so on. There may be market shakeouts and scares, but until something happens to upset the applecart like the appearance of the Fed pushing on a string, we should be OK.

Furthermore, with our budget and national debt out of control, fiscal policy is still in spending disequilibrium in favor of the bulls. Maybe Paul Krugman's  who has a damn the torpedoes spend more approach or Larry Summers with his non deficit worry approach will disagree. But in my opinion, Krugman is on a pedestal way over his inflated liberal ego's ability. And, speaking of egos, Larry Summers makes more sense, but even his Laissez-faire budget approach is way out there.

2 - Investor Sentiment.

We all know that bullish investor sentiment is off the charts in sell territory. That also goes for the extended markets deviating from their long term moving averages by historic proportions. I'm certain that we can find loads of technical metrics all wrapped up into some indicator that is flashing a whopping sell signal.  Chalk off one for the bears.

3 - The Tape

After all these bull market years, the tape is still strong. But, I think there will be some re-alignment of asset allocations by the institutional investors as the 2014 begins. In addition, now that last quarter performance games are over, I think that some market leaders may be due for a visit to chateau bow wow. Perhaps this will result in sector sell offs and group rotation. In my view, tape momentum is ripe to turn on a dime. I will be watching things like new highs, opportunities to profit on individual stock breakouts, market leaders, McClellan oscillators, etc.

Summary

I think that this year things will not be as easy as last year, but in the end, monetary policy will win out. Plus, our government is in no position to do something fiscally significant. Nevertheless it does not matter what I think on a macro market basis unless something big happens to change the big picture stock market equation from bull to bear. Perhaps some exogenous big international crises will do the trick. The market is not historically overvalued, except for some individual stocks. Until then, I will go with the flow, taking what the market gives me, not fighting the tape.

So call me concerned about investor sentiment and whatever new year theatrics the tape throws at us, but in no way am I ready to make some big market turning call or make a change of posture. As always, I reserve the right to change my views on a dime. For me flexibility and defense is the name of the game.  My risk control comes by playing short term momentum, cutting my losses and being prepared to quickly reassess and change my posture if necessary. Asset allocation is not my game, but hedging may be done on a day or swing trading basis if I need to act fast to protect myself. For intermediate term holdings, I intend to play small and see how the cards are dealt out for now. Mostly bullish, short term trading and swing trading shall continue to reign as my preferred vehicle. I will let the tape and the number of opportunities determine how much money to invest.


BIG Capital Advisors LTD and Seaview Partners LLC 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.