4/21 Post Market Notes

...The bulls finally made a move today, though how much of it was short covering remains to be seen. The market is not out of the woods yet, even with today's action. The bulls are chortling, happy days are here again. But now we'll have to see whether this rally has legs. They need a follow through day at the least.
...Volume was much better today, although the NYSE volume still outpaced the Nasdaq volume.
...And the new high vs new low numbers still were decidedly unimpressive. NYSE: 23 new highs, 66 new lows; Nasdaq: only 28 new highs vs 105 new lows.
...And Nasdaq volume came in lower than the volume on yesterday's decline.
...S&P: DaBoyz parked the S&P at 1159.95, just below the 200 day EMA of 1160.47. Serious resistance for the S&P lies just ahead at 1163. That number was a battleground congestion range in November, January and March. If the bulls can clear that hurdle, they still will need to clear 1192, the last intermediate term high, to re-establish a bull trend. They have a lot of work to do.
...Nasdaq: I think the bulls got a lot of help today from shorts covering their positions. The gap down last week trapped late arriving shorts. When DaBoyz put the pedal to the metal this morning and closed the gap, the shorts were falling all over themselves covering and helping to rocket the prices higher. The Nasdaq's strong price action helped push the 50 day EMA slightly back over the 200 day EMA, but the index is still a long way below both. Next resistance is in the 1970-1975 range for the Nasdaq, and serious resistance at 2000. Then there's the two EMAs at 2006-2007, and the last intermediate term high at 2019 to clear, so there's a lot of work left to do there as well.
...XOI: Oil had another nice day today, and has now been up three of the past four days. XOI closed above its 50 day EMA today. Normally I would get back on board here, but as shaky as the markets have been lately, I prefer to see the index clear the serious resistance at 850, much less the last intermediate high of 873. I still believe we are in a long term bull market in oil, and there is plenty of time to get back on board.
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...I closed out both trades I was in today, and also put on a daytrade in the QQQQs today, something that I don't do often, as daytrades on the long side have been the worst part of my trading. As of the close, I'm in cash in the short term port. I'm building a watchlist for short term trade possibilities, depending on how tomorrow shakes out, but I'm still not comfortable committing to anything more than swing trades in this environment. There is still plenty of time to get in on longer term moves, in my opinion, if this bull move is for real. I still have my doubts that it is.
...I'm looking for the market to start strong in the morning. Then after the counter reaction move, will see how it plays out from there. If the bulls can hold on, I'll likely enter a trade using the 4/21 low as the stop. If the bulls can't make the rally hold, I'll have a short trade ready to go, using either the 4/21 or 4/22 high as a stop, whichever is lower. I don't plan on doing anything for the first half hour, just watching. Likely only one trade either way tomorrow, though. I'm not ready to make any serious committments in this manic market. The volatility is increasing and I think that hedge funds are jerking us back and forth. I also am of the opinion that the MM's juiced the market this morning to cause the gap and make the shorts cover, so I need more convincing before believing this move is for real.
...Unless I find something more compelling, I'll likely use one of the indexes, probably the QQQQs to enter the swing trade. If it's on the short side, I'll probably go heavier since the trend is still down until proven otherwise. I still like AAPL on the long side, though I cashed it in today, not wanting to hold it overnight. APPB looks like a potential short trade.
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...For those keeping score, the VTO 5 day RSI trade closed out today for a .4% gain, bring its year-to-date gain to 2.9%, vs -10.7% for the Nasdaq 100. I didn't play it this time. Once again, that is an excellent website. The graphic displays of the sentiment indicators on the site are great information. http://www.vtoreport.com
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4/21/05 intra-day notes

Oil leaks
Goldman Sachs prediction on oil: On March 30, Goldman Sachs advised that the world energy markets are in the early stages of what could be a 'super spike' in prices up to $105 a barrel. They further advised that this forecast is on the conservative side.
http://money.cnn.com/2005/03/31/news/international/goldman_oil.reut/index.htm
"Goldman is the biggest trader of energy derivatives," the article goes on to say.
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Dissenting opinions:
http://www.marketwatch.com/news/story.asp?dist=&param=archive&siteid=bizjournal&guid=%7BF25E14D4%2DFDFE%2D4CC6%2DBDC2%2DFCB6BCA84E57%7D&garden=&minisite=
In the MarketWatch article linked above:
...John Kilduff, energy risk analyst, Fimat USA: "I don't know how they get to that number, short of a significant supply disruption event occurring."
...Kevin Kerr, Kerr Trading International, called the Goldman announcement irresponsible and "clearly an attempt to talk up the market on nothing more than hot air. Goldman has huge speculative energy positions and they have no interest in watching it go down right now."
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...Here is a link to the Daily Reckoning site for another take on the Goldman analysis. In this article, from the Rude Awakening portion of the site, the author advises that he is a long term bull, but would probably favor fading the Goldman prediction, at least in the short term. Please note the chart showing the divergence between the price of crude oil and XOI, the index of oil stocks. That divergence appeared to be bearish for oil stocks, and indeed they have suffered since.
http://dailyreckoning.com/RudeAwake/Articles/RA040505.html
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Stat of the day: On March 30, the day the Goldman analysis was released to the public, XOI had been in retreat for seven straight days. It had fallen from 875.03 on March 18 to close at 829.63 on March 29 on the heaviest volume in over two weeks. March 30, it closed at 840.16 and two days later was at 870.23. On April 20, XOI closed 814.80, down 3% since the March 30 announcement, and 6.4% since the high two days later.
...I don't know who was correct, or what their motivations were in either case, in the difference of opinion between Goldman and Mr. Kerr. In the long term, I am very much an energy bull, but in the short term, XOI has topped and has fallen, not risen.
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...I will say that when I think that XOI has turned bullish again, I intend to back up the truck and load up on my favorite energy sector stocks. I won't buy all of them, of course, but they include VLO, XTO, SU, CNQ, and EOG. I tend to favor North American stocks in the sector in order to reduce geo-political risks.
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XTO
...XTO: This has been my longest term favorite in the oil/gas sector and it has me concerned. It peaked at $36.50 on April 4, which with the benefit of 20/20 hindsight, was a parabolic exhaustion top. Since then, as of the 4/20 close, XTO had dropped 15.6%, in comparison to a 6.7% drop in the XOI index.
...Yahoo Finance lists APA, BP and XOM as competitors to XTO for comparison purposes. I also added SU, another favorite oil company of mine. Those four companies have dropped 11.7%, 5.2%, 7.5% and 13.0%, for an average of 9.3%.
...Over the 13 sessions from April 4 through April 20, the five up days averaged 1.7M shares and the 8 down days averaged 1.8M shares.
...This has been a long term holding for me, but sitting through a 16% hit makes me antsy, and I don't think it is over.
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Greenspan: Budget Deficits Pose Danger
http://biz.yahoo.com/ap/050421/greenspan.html?.v=11
Though you'd never know it by today's market action. Are these manic markets, or what? Gloom and doom everywhere yesterday, now today buyers are falling all over themselves.
...Actually, I think the bulls were finally able to force a lot of shorts to cover today. If you look at a chart of the Nasdaq, the action of the past four days had created an island, trapping all the late arriving shorts. Now today, the new shorts are covering and the longer term shorts are booking profits, it appears to me.
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Definition (paraphrased from another site):
Analyst Upgrade: Brokerage has shares they need to sell. The upgrade is a tool to add liquidity by bringing in buyers, and at a higher price.
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Happy trading all.

4/20 intra-day notes

Links:
...I've noticed recent news about China vs Japan tensions. I think this could end up having wider economic implications for the world economy, so I wanted to bookmark the following article for future reference. I've been a little unclear as to why there were supposedly spontaneous demonstrations in Chinese cities recently, reputedly going back to war atrocities a half century ago. That sounds a little too convenient, something like those spontaneous demonstrations in Vietnam years ago, when the natives were carrying protest signs written in English (not for the benefit of the U.S. media? Yeah, right.) Anyway, here's the link:
http://biz.yahoo.com/bizwk/050420/b3930102mz015.html
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http://clearstation.etrade.com/cgi-bin/bbs?post_id=6479278
...The Role of The Specialist. This link is to a message on the COMPX board on ClearStation. The message contains lengthy segments from books by Richard Ney in the 1970s. I've never read the books, but these segments interest me and I may try to find them. A lot of what transpires in the markets daily makes sense if you look at it from a different perspective.
...Someone close to me who trades for a living once told me that he used to get more frustrated when he thought the game was on the up and up. Once he realized that everyone sitting at the table had an ace up one sleeve and a dagger up the other, his world changed. Price movements that had made no sense now were logical.
...Dr. Alexander Elder, in his book Trading For A Living, an excellent book by the way, makes the analogy of trading vs driving a car in civilized society. He says that when you open your car door into traffic, other drivers will try to avoid you, not because they like you, but because the complications from hitting you outweigh the benefits. They may yell at you and make gestures at you, but they will try to avoid you. In the markets, however when you open your door into traffic by making an ill-advised trade, there is a mad rush among the other market participants to see who can get to you first, and hopefully take off your arm along with the door. True enough, from my experience.
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Quote of the day:
"We are getting slower growth and higher inflation numbers. The Fed is caught," said David Wyss, chief economist at Standard & Poor's in New York. "The Fed would like to keep interest rates low to keep the economy moving but on the other hand they have to fight against inflation."
http://www.businessweek.com/ap/financialnews/D89J7CG00.htm?campaign_id=ap_news_up
Above is the link to the entire article on Business Week online.
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4/20 Notes

...A few comments on yesterday's market action:
...The bulls are still not out of the woods, and yesterday's action was not as strong as it appears on the surface. NYSE volume still exceeded Nasdaq volume. That is still a sign that is normally associated with weaker markets, as it reflects that there is still little genuine buying enthusiasm out there.
...NYSE 18 new highs vs 67 new lows; Nasdaq 29 new highs vs 116 new lows. I have found that keeping an eye on the new highs vs new lows ratios is a handy barometer for judging the overall health of the markets at a particular point in time.
...Even with all four major indexes, the Dow (DJI), S&P 500 (SPX), Nasdaq (IXIC), and Nasdaq 100 (NDX) being up this week, they are all still trading below their 50 day and 200 day exponential moving averages (EMA). The volumes on this week's rebound do not match the volumes on last week's selloff. And none of the indexes, even after two rebound days, are back to where they were at the open Friday. Moreover, NDX is about ready to complete a dead cross, where the 50 day EMA crosses down through the 200 day EMA.
...The bulls clearly have a lot of work to do. After hours (AH) action last night was strong, and with favorable media pumping, a gap up and strong open is likely. After that is anyone's guess. But at the minimum, the 200 day EMAs need to be recaptured soon.
...It will also be difficult for the markets to rally strongly for long without the tech stocks help. INTC reported good news and was up strong in AH. They may provide the rocket fuel the bulls are looking for. Strong tech stocks would also help the Nasdaq volume to move back up ahead of NYSE volume, as the tech stocks are primarily in the Nasdaq.
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...I'm still holding long term positions in XTO, SU, CRT and VLO in the long term port, so that made for a nice day yesterday finally. It has been rough going. I almost added a short term trade in XTO yesterday, but held off for two reasons. First, they report earnings today, and I don't like to hold trades going into earnings. Since I never seem to know which way the stock will react to their earning's announcements, I try to take that uncertainty out of the equation. Second, the XOI oil index as a whole is not out of the woods yet, in my opinion, so I am regarding yesterday's favorable price action as a counter trend bounce in the short term. Although I am firmly in the long term bull camp regarding energy companies, in the short term, the top is in and has been verified. I won't be bullish again from a trading standpoint until XOI can take out 850 at the least.
...I only have two short term trading positions open at the moment, and one is AAPL. AAPL is a perfect example of why I don't like to hold stocks through earnings announcements. They beat expectations by over 40%, their sales were up 70%, earnings up 500%. But when the earnings were announced, the shares were trashed. AAPL announced on the 13th. They opened that session at 42.95, but closed at 41.04. They have traded as low as $34.00 since, and closed yesterday at 37.09. And that is why I don't like to be holding short term trades when earnings are announced.
...AAPL's $34.00 low on April 18th appears to have set a new short term low. The chart also shows strong support at $35.00. So I like this trade as long as the overall market cooperates and doesn't tank. I am looking for the market to continue a rebound short term, but then tank again. I am one of the bears who believes that what we have seen since October 2002 is a cyclical bull market within the context of a longer term secular bear market. The excesses have not been wrung out of the system, and there is still more pain ahead. As Mr. Volcker pointed out in his article 'Economy on Thin Ice', link given in a previous daily commentary, even governments have a hard time prospering long term when they spend $1.06 for every $1.00 of revenue. But as a short term trader, I try to trade my system, not my opinions.
...WMT is a stock that I follow regularly, and that is one ugly chart.
http://www.forbes.com/investmentnewsletters/2005/04/12/cz_mr_0412chartroom_inl.html?boxes=author
The above link is to an article on Forbes online. It shows a Wal-Mart chart and in the article Arch Crawford, a well know technical analyst, gives his outlook for WMT. In short, he says that since its highs in 1999, WMT has formed a symmetrical triangle. It has now broken down out of the triangle, which is bearish. He has set $39-40 as a short term price target for the shares, with a possible break all the way down to $25-27. The stock would need to rebound to $55, or better yet $58, to void that negative outlook, in Crawford's opinion. WMT closed yesterday at $47.60.
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...I still intend to post model portfolios and more notes on my personal trades, I have found that keeping a journal helps my performance. It is also helpful to print out charts of all trades, so that I can go back at a future time and review exactly what I was looking at when entering and exiting trades. I also hope that perhaps people reading this log can avoid some of the mistakes I have made over the years, and still make too often. Sometimes I think I have made every mistake than could possibly be made. But I have survived, and that is no small accomplishment in this game.
...Regarding my continuing education in the school of trading hard knocks, I was given another rap on the knuckles a couple of days ago by Mr. Market because I didn't follow my system. I allowed my emotions, not my stop, take me out of a trade. I saw my position going against me and got out, even though the stock was nowhere near my stop. Almost immediately, the stock reversed and charged higher. I took a $100 loss. A day later I would have been up over $600 on the trade. And I would have been if I had stuck to my guns and followed my system. There is very little difference between winning and losing in this business.
...Over the years, I have found that my emotions are the weak link in my system. I allowed myself to be knocked out of the trade because I have been going through a slump, and did not have the confidence or courage to stay with my system. That is frustrating. And that is the mistake that recurs more frequently than any other in my trading.
...For some reason, that reminds me of a comment in the book Pit Bull, where the author laments that when you are going good, you don't listen to anyone, but when you are going bad, you want to know if the shoeshine boy has heard anything.
...Happy trading, all.
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4/19 Notes

Links:
http://www.morganstanley.com/GEFdata/digests/20050418-mon.html#anchor0
...This is an article by Stephen Roach, economist for Morgan Stanley. Sometimes I wonder if they keep him on as the token bear. This article is entitled 'Tilt'. The title comes from Roach's opinion that the "....unbalanced global economy is at risk of becoming unhinged. The system was already threatened by account deficits and imbalances. Now there are several other blows, among them energy, trouble between China and Asia, and protectionist sentiment here in the U.S. What Roach finds particularly troubling is that the latest market tank job occurred with oil prices falling, not rising, indicating that there are reasons for the fall other than the excuse you read in the media every time the market is down ("Traders reacted today to rising oil prices, ad nauseum...).
...Roach's opinions, whether you agree or not, are always well thought out and describe thoroughly.
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http://www.safehaven.com/article-2923.htm
SafeHaven is another site that is required perusing for me. Unless you are a perma-bull and never want to hear the other side of the story, there are often interesting articles. Today's Stock Market: CNBC Report by Bill McLaren is good. McLaren seems to be an excellent technical analyst. His charts are interesting and I like his take on the time factor in the markets. He focuses some attention on how many days it takes a market to go up and complete an up move vs how many days the down move lasted. I haven't seen that viewpoint often, and it is interesting.
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http://www.marketwatch.com/news/story.asp?guid=%7B414532AE-BC13-4AE4-B235-E18640CD1295%7D&siteid=mktw

Marketwatch article "Standard Bear". An interview with James Grant, who publishes "Grant's Interest Rate Observer. Brief, interesting interview. The part that particularly attracted my interest was in regard to energy prices. Grant feels they are not in a bubble, and that Wall Street is under-estimating the energy companies. I agree.
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MISC NOTES:
...Monday 4/18 market action was not awe inspiring, to say the least. While some feared a complete meltdown after last weeks action, especially after Friday, others looked for a big bounce. Neither occurred.
...On the boards I frequent, bulls are still bullish and see this as a great buying opportunity, bears are still bearish, but holding, not initiating new positions. Both camps seem to be expecting a short term bounce. I thought yesterday might be a big up day, and I consider it a negative for the bulls that it was not.
...The market plummeted through several important support levels last week. The Dow, S&P, Nasdaq, and Nasdaq 100 all now sit below both their 50 day EMAs and the 200 day bull/bear dividing line EMA. Yesterday, they all were up, but not much, not nearly enough to dent Friday's losses, and the volume was lighter than Friday. The bulls really need to make a stand.
...I had two day trades yesterday in XTO and VLO. I normally don't day trade anymore. It is not my style, and I have lost trying it over the years. But yesterday I succumbed to the temptation, and they both worked out ok. I did it because these are two stocks that I follow daily, so I feel comfortable with them. After their selloffs, I was looking for a bounce. I probably would have held onto the trades, but both stocks are reporting earnings this week. One of my short term trading rules is not to hold stocks on the day they report earnings, since I never seem to know which way they are going to break when the earnings are released.
...http://www.vtoreport.com/rsi.htm
I've mentioned the VTO Report before. The site maintains a historical record of the effects of making a QQQQ trade based strictly on the 5 day RSI of the Nasdaq 100. The public trade-by-trade records go back to 1997. When the 5 day RSI of the NDX goes below 30, the trade is entered at the close of that day. You hold on until to day the 5 day RSI goes above 50. The money from one trade is all rolled over to the next trade.
...I mention the VTO Report 5 day RSI trade because it is currently open. The trade was entered 4/14 with the NDX at 1441.13.
...The previous 85 trades have yielded an overall return of 347.8% (the record does not include commissions or slippage), as opposed to 81.6% for the Nasdaq 100. More interesting is that the system has NEVER had a losing year. Its worst year was last year, with a 3.4% gain.
...I have used this system a few times. I usually don't take the signal just as a result of the 5 day RSI. I look for some other market confirmations. What bothers me the most about the system is that there are no stops. So you can suffer through some pretty powerful down turns if the market doesn't bounce back. I always use stops on my trades. The largest loss the system ever incurred on a trade was 14.1% in August 2001. That would have been too much for me. I don't intentionally allow a trade to go that far against me. But it is hard to argue with the results of this system. You are out of the market most of the time, and have a 4x better return than the index benchmark. That is impressive.
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4/18 Notes

Links:
http://www.washingtonpost.com/wp-dyn/articles/A38725-2005Apr8.html
Economy On Thin Ice, interesting article by Mr. Greenspan's predecessor as Fed Chairman.
Key quote:
"The difficulty is that this seemingly comfortable pattern can't go on indefinitely. I don't know of any country that has managed to consume and invest 6 percent more than it produces for long. The United States is absorbing about 80 percent of the net flow of international capital. And at some point, both central banks and private institutions will have their fill of dollars."
...Volcker speaks in plain English about the problems confronting our economy. He is not a perma-bear, he is one of the most 'connected' of the 'connected'.
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http://www.bullnotbull.com/bull/Article39.html
...This is an article on the bullnotbull website. I think it is compelling because it points out how we are in a period of transformation in our world. I personally think we are in the last days before the return of Jesus Christ, and there are dramatic changes going to occur on this planet. But this is not an article of religious nature. But it speaks of dramatic change in the social, economic and political arenas that occur every several generations.
...Along those same lines, several years ago I enjoyed reading a book entitled The Great Reckoning. Its authors picked out what they foresaw as trends developing in the world, then extrapolated out those trends to what they deemed to be their logical conclusions. Whether you agree with their conclusions or not, and once again, it was not a religious book in any sense, the book was compelling and thought provoking.
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...Michael Nystrom's article on bullnotbull.com linked above also mentions Craigslist, a grassroots person to person national classified ad concept apparently. I've never heard of it before, but intend to check it out.
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http://www.russiantrader.com
...The Russian Trader is another interesting site that I came across recently. Lots of good information. He trades options, which I don't, but his insights are interesting. He has charts and regular daily and weekly commentaries. By the way, he thinks the markets bounce the next two or three weeks, then go down again. He advises that the 3rd week in April has been overall profitable for the past ten years in a row, even after bad 2nd weeks. We'll see.
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4/8 Pre-Market Notes

Links:
http://www.dailyreckoning.com/RudeAwake/Articles/RA040805.html
Fighting The Tape of Eric J. Fry. Discusses current oil markets, mostly with Kevin Kerr of Resource Trader Alert, in lieu of Goldman Sach's call last week for up to $105 oil spike. Excellent insight, worthwhile article. Kerr likes oil longer term but feels the current oil market is due for a correction, not a spike.
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That article is contained on The Daily Reckoning website. That site is required daily reading for me, not only for the subject matter it contains, but the writing quality is exceptional.
http://www.dailyreckoning.com/
...Today's issue has another excellent article on the energy market by Dan Denning.
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Today's FT.com Financial Times Online also has a good energy related article:
http://news.ft.com/cms/s/a3b6a0c2-a792-11d9-9744-00000e2511c8.html
IMF Warns On Risk Of 'Permanent Oil Shock'.
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FNM: This stock has enjoyed a good week, and a much needed respite from its recent relentless downtrend. This week's positive action has come in spite of it being featured in the news the past couple of weeks even more than usual. I'm starting to look for another chance to get short on this one.
...This stock has been one of my two biggest trading disappointments of the year. I shorted this early in the year at 64.58, but then because of setting my stops too tight and being too worried about trying to win every day instead of trying to let trades develop, I allowed myself to be stopped out (for a loss!) only to watch the stock turn around and do what I thought it would. It actually bottom at 49.75 in April.
...That trade was one of the ones that sent me back to the drawing board to re-evaluate what I was doing. Trading is a tough business, and I have a tendency sometimes to get away from my system, and to fall into bad habits. I am competitive by nature when it comes to trading, and I don't like to lose. So I have a tendency to be too aggressive and to over-trade. Those tendencies will get you hurt in this business. They may be ok for daytraders, but daytrading doesn't work for me.
...I recommend making copies of the charts of all your trades, both when you buy and sell, for later review. To me it is like a football coach reviewing game films. I also keep all my trades logged on Excel spreadsheets. When I am in a time of retrospection and re-evaluating the system, it gives me an objective look at how my longs and shorts are doing, what time frames are working for me; in short, what is working and what is not.
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...Seriously considering shorting XTO today. It is being sold off harder than its group for whatever reason. If I do, will set the stop just above yesterday's high of 35.64, with the expectation that this looks like it could fall at least to 32.50.
...Looking at AAPL, ISRG, TEVA long, and SBUX and MNST as possible shorts for today's watchlist, in addition to my core watchlist, depending on how it goes. Also might go long QQQQ or SPY for a while if we go up. Supports look to be firming, and it is appearing that the intermediate term lows might have been set eight sessions ago.
...Happy trading all.

4/7 Journal and Misc Notes

...The markets rallied today, but once again NYSE volume was higher than Nasdaq volume, and Nasdaq was on the light side at 1.7B shares. NYSE had 90 new highs vs 22 new lows, but Nasdaq only had 55 new highs vs 82 new lows. So, the rally is still suspect, especially with turn of the month buying done.
...On the other hand, I am finally getting short term bullish. The Nasdaq finally closed above its 200 day EMA today, and it increasingly is looking like the low set eight sessions ago may be an intermediate term low, what with the short term lows holding that were set three sessions before it and four sessions after.
...MSFT has been making a strong move, and that should bode well for the index as well, at least short term. I'll be scanning tonight for some short term trades on the long side.
...Beyond the short term, I think the rally will fail - I still don't see any sign of buying enthusiasm. When it tops out, I'll be looking to load up short or back into the oils if they have bottomed by then.
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Links:
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http://www.joe-duarte.com/index.asp
...I subscribe to Dr. Joe Duarte's free Monday newsletter update. It is a nice way to start the week. He gives good background information. Today on his site, his newsletter update is entitled "China and the U.S.: Rising Tensions Over Trade. Oil: Saudis Fear Global Economic Slowdown. Stocks: Trying to Round Out A Bottom. It's an interesting article.
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http://news.ft.com/cms/s/d7a003c4-a6a2-11d9-a6df-00000e2511c8.html
This is an article in the Financial Times online addition titled "World Bank Warns on Dollar 'Risk' For Poor". Its lead sentence, "Developing countries that have amassed large US dollar reserves face a growing threat of big losses from a sudden decline in the dollar, the World Bank warned on Wednesday."
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Quotes:
...Also of note was a quote from the Wall Street Journal: "The world bank warned that the global economic recovery has peaked, and said that the severity of the coming slowdown will depend on how skittish foreign investors are about buying U.S. - dollar-denominated assets."


Intra-day notes: Old favorite XTO is clearly being distributed the last few trading days. It has traded on a percentage basis well below the overall XOI oil index the past few trading sessions. It closed a full 2.6% below XOI. I have noticed pretty much the same thing all week...Not sure why they are weaker than their peer group. I see where the president of the company is retiring. They were also downgraded by JP Morgan 3/1, but that has been a while ago, and I normally don't pay much attention to analysts upgrades and downgrades anyway. For that matter, Deutsche Securities initiated coverage on XTO 4/1 with a Buy recommendation. I know XOI is for oil, and XTO actually is an oil and gas company, and some folks consider it as more of a gas company, but I have kept an eye on the relationship between XOI and XTO for quite a while.
...I keep a core position in XTO in the long term portfolio. I first bought this stock back in the mid 90's, and many times since have wished I had just stayed in it from the first time I came across it instead of trading in and out. Quite some time ago, I finally decided to keep a position in it as a long term buy and hold, although I still look for opportunities to trade it in the short term port. Right now, as I mentioned a couple of days ago, it looks like a better short than long, but I'm not trading it and don't have any plans to do so - of course that could change by tomorrow, LOL.
...XTO is one of my most favorite long term stocks. I am a long term energy bull. They are a well run company with an excellent niche in their industry. I also like the fact that they are completely contained in the good old US of A, which negates the political tensions in the world's hot spots.
...I also keep a core position in their sibling CRT. I first came across CRT when it showed up one day in my account. I had never heard of it and at first thought there must have been some kind of mistake. It turned out that XTO had spun off some of it to XTO shareholders. CRT is set up to pay out royalty payments to shareholders on some of the oil/gas properties in New Mexico and Oklahoma. It pays monthly, and for the last year or so those payments have averaged around $.20 per share per month, which has been very nice. I have added to the CRT holding several times. I don't keep it on the live ticker, though. With its small float, it sometimes takes some gutwrenching twists and turns.
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WMT: WMT warned this morning that its profits would be around the lower end of projections. It is interesting that their average trading volume over the past 10 days has been 15.7M volume, compared to 11.7M three month average trading volume, and the stock has gone from 50.58 to 49.35 over those 10 sessions.
...Price and volume can be good indicators. It reminds me of looking at price and volume charts on both K-Mart and Sears the two or three trading days before the news was announced that K-Mart was buying Sears. Go back to November and take a look for yourself.
...One of the reasons my system has gotten simpler over the years is because of ignoring news items. I have come to believe that most of what you need to know when trading can be discerned from watching a stock's price and volume movement. I keep a core list of stocks that I watch daily, so I can get to know their trading habits. Then I look at scans sometimes during the day or evening to get new short term trading candidates.
...But I try to stay away from trading on news. First, I know I'm not smart enough to know how the market will react to the news. Also, I also often see footprints on the price and volume charts on the sessions immediately preceding the release of the news item that would make a suspicious mind wonder whether some folks had already taken their positions.
...When I'm trading at my best, I enter positions during quiet periods for a stock and then subsequently get a move in my favor. When I'm reacting to news items and getting jerked back and forth by intra-day gyrations is when I have the best chance of getting hurt.
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4/6 Journal & Pre-Market 4/7

...Didn't get a chance to post last night.
...Was another kind of depressing day for the major averages, IMO. For a while yesterday it looked like this could finally be the rally. Then everything tanked in the afternoon. All three major indexes made inverted hammer (or finger) formations. All closed down significantly from their daily highs.
...Both the Dow and the S&P remained above their 200 day EMAs, but below their 50 EMAs. The S&P's 50 day EMA is 1188.93. The S&P briefly went above that at 1189.34, but couldn't hold, finishing at 1184.07. Strong triple bottom support remains intact at the 1163 level.
...The Nasdaq once again could not finished above their 200 day EMA. The 200 day EMA is 2012. The index penetrated it again, going as high as 2017, but couldn't hold it. Since the Nasdaq closed below 2000 for the first time on this recent slump on March 18, it has traded between 1968 and 2017. Yesterday was the 2nd time it hit 2017. In 11 of the 13 sessions since March 18, the Nasdaq has ventured above the 2000 level, only to be rebuffed and close below it. It has become very strong resistance. Yesterday, DaBoyz parked the index almost directly on top of that number, at 1999.14.
...Still undecided as to market direction. Nasdaq 1975 support is still intact. But it hasn't been able to get past 2000, and the oversold conditions that were giving hope for a short term bounce have been mostly relieved. Also, we have moved out of the TOM (turn of the month buying period when the 401k and mutual fund inflows from paychecks come in and provide a more bullish scenario for the markets).
...So it looks more bearish to me, but that is normal. I tend to have to look harder to see the bullish case than the bearish one. So I guess that means we'll have the breakout rally today with big volume? Who knows. Still looks weak to me.
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...Nasdaq volume went above NYSE volume yesterday, though not by much. Nasdaq volume was 1.77B shares, not heavy volume, compared to 1.73B on the NYSE. NYSE new highs/new lows improved to 90 new highs vs 21 new lows, but the Nasdaq still was negative at 75 new highs vs 93 new lows.
...The XOI oil index had a nice day. The 850 support held. But it still wasn't able to make it through the latest short term resistance at 873. And the PTB and friends are still trying to talk it down. Saudi Arabia is threatening once again to raise production levels, as if they aren't already cranking, and I'm seeing more articles about oil being in a bubble.
...I'm not using any leverage until the markets show some direction one way or the other. But I am a little heavier invested than I feel comfortable about right now. I'm keeping bearish mutual funds open right now (URPIX and SOPIX) to hedge long trading positions on individual issues. And my stops are set tighter than normal. Trading in these narrow ranges for so long on light volume makes me think that there is a breakout coming. Small ranges lead to large ranges normally, and vice versa. I'd be more inclined to believe the break will be down, but you never know.
...When I first logged on this morning, the futures were up and the articles were bullish advising how the markets would open higher. Then the numbers went down, and the media still hadn't had time to revise their articles. Now the numbers are still down, and the articles have been adjusted to tell us why the markets are mixed. I love it. If you just scan the headlines some mornings on some of the feeds, it is laughable watching them change. And they are always the experts, and always have a reason - even if it is wrong.
...Anyway, happy trading all.

4/5/05 Journal

...It was another unimpressive rally for the indexes today. The bulls were handed a gift today when Mr. Greenspan spoke regarding the energy markets, and knocked XOI down nearly 1%. But the bulls couldn't do much with it.
...XOI looks like it put in a top in early March. Since then it has put in two straight lower tops, and two lower bottoms. Three of my old favorite energy related stocks that I follow daily, XTO, SU, and VLO, completed ugly chart patterns today, and look like better short candidates than longs at this point.
...Short term, XOI at the minimum needs to take out 874 to be considered bullish again, and that would still leave it well below the March top of 894.94. I still like energy in the long run. But that chart is ugly right now. I have long term positions in XTO, SU, VLO and CRT in the energy sector. I also move in and out of trading positions on them. But I'm not looking to add trading positions until they either show strength again by clearing their latest short term resistance (and that would be a swing trade only), or better yet, come back to their rising 50 day EMAs (which would be longer term position trades.)
...Yesterday's Stock of the Day, AIG, couldn't follow through on yesterday's rally, surprise, surprise. Yesterday they were upgraded by two major houses. As good as yesterday's rally might have looked, it did not match the damage done last Friday. Today the stock was up early in the day, but then tanked this afternoon to close down $.30. It still looks like a good short to me.
...Today's Stock of the Day, PFE, announced a $4 billion cost cutting program, and that they expected to return to double digit revenue growth next year. In the meantime, they cut their forecast. The Street seemed to like what they heard, driving the stock up $.97 today on 53 million shares of volume, but like AIG yesterday, I think all they did was give a better entry for shorts, for those who weren't already in.
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...Today's main numbers:
With XOI being down .96%, you'd think the market could have done better than the Dow being up .36%, the S&P .45%, the Nasdaq .41%, and the Nasdaq 100 .48%. Volume was still unenthusiastic, too, at 1.8B on the NYSE and 1.6B on the Nasdaq. Once again, volume was heavier on the NYSE than the Nasdaq, not a good sign. The NYSE had 71 new highs vs 37 new lows, and the Nasdaq 50 new highs vs 116 new lows, not the stuff of bull markets.
...The Nasdaq remains trapped beneath the 50 day EMA and the 200 day EMA bull/bear line.
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...I have been expecting the bulls and the PTB (Powers That Be) to jam the numbers and put on a rally. With the turn of the month 401k money coming in, I thought this would be the time. That window is now closing, and all rally attempts have been weak and met with selling. The BKX (bank index) also briefly broke support today, and its 50 day EMA closed below its 200 day EMA. It would be very difficult for the markets to rally without the BKX.
...Cash looks like a pretty good option right now.
...I read a post on another message board recently from a man who thinks that DaBoyz game the 401k deposits that come into the market, and that accounts for some of the strange action that we see sometimes. According to him, and I have not checked this out, they way 401k money is handled is heavily regulated by Congress and must be put to work immediately once it has been handed over to the administrators. He says that by law, the funds also must make their buys at the closing price of the day it is put to work. DaBoyz, knowing this and knowing what date the money will come into the market, front run it and take positions ahead of it.
...His theory is that they often buy heavily into the close ahead of the 401k buys, forcing the funds to buy high, then sell either right at the close or early the following day's session and go short, forcing the price back down, thereby fleecing the 401k participants. He claims that it is the strict regulations that the funds must adhere to that makes this game so easy for DaBoyz.
...I don't know. It sounds logical, but I haven't had a chance to check into it much. I don't see a discernible pattern just from a cursory look at the daily charts. But I do intend to watch the hourly charts on Fridays, the 15th and 30th of the months, and the following days for a while to see if I can pick up on anything. Just putting this out as food for thought.
...I'm not putting any of this out as fact. It just was interesting and sounded logical. If you've traded long enough, you see a lot of strange things from time to time.
...Another thing he mentioned is the moral dilemma that a lot of fund managers face. On a regular basis they have all this money coming in, which by their fund charter, they must invest. They know what stocks they are going to be buying. And, except for the 401k money, which according to this poster has to be invested quickly, the other inflow money can take a week to ten days or so to be put to work. What is to keep the manager from taking a position in his or her private account ahead of his fund making their trades? Then when the fund makes their trade, he or she can exit the trade in their private accounts and pocket a tidy profit. Given the amount of shares that funds buy and their power to move stocks, that is another thing that one could see how it could happen if there were unscrupulous fund managers around. It's a good thing they are all so honest.
...Once again, just passing on something that caught my interest and may be worth thinking about. Not verified, not intended to be taken as regard to any particular person or institution. Just food for thought.
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Link of the day:
http://www.dailyreckoning.com/RudeAwake/Articles/RA040505.html
It's an article by Eric Fry entitled "Fading Goldman Sachs", in reference to Goldman's raising their oil price spike target to $105 recently. Some good points here, and as always on the Daily Reckoning, the writing is superb.
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4/4/05 Journal

...A message board I frequent had a repost of a February 2005 Daily News interview with Joe Granville, an 81 year old market maven who has had a newsletter for what seems forever. Granville at times in the 60's and 70's had such a wide following that it seemed he could move the markets with some of his pronouncements.
...He was famous for calling the bear market of 1973-74, and the 2000 market top, but missed on some other calls, such as being bearish and completely missing the bull run from 1982-1986. As a result, from what I hear, he has lost much of his following.
...In the article, Granville is calling for a Dow of 7400 before year end, and the Nasdaq below 1000. He thinks the markets are in a more precarious position than they have been in years.
...The article ended with a Granville quote, "People don't realize that most who think we're headed higher are the same people who missed January," he said. "I am the exact opposite of Wall Street."
...To which one of the wags on the board responded, "I guess that means he's honest and poor."
I like it.
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...Today's rebound was tepid at best, and the market remains at some important support and resistance levels. DaBoyz parked the S&P just above the 1175 mark at the close. 1175 has been a congestion zone several times going back to December.
...The S&P is below the downtrending 50 day EMA, but still above the 200 day EMA. The Nasdaq 100 still sits below its 200 day EMA, which is serving as daunting resistance in recent days.
...Once again NYSE volume exceeded Nasdaq volume, 2.1 million to 1.6 million, which is yet another sign of a weak market. The NYSE had 59 new highs vs 57 new lows, and the Nasdaq had 42 new highs and 135 new lows.
...Although a lot of indicators are oversold, there has been little buying enthusiasm. The bulls need to get something going, or there is real danger of increased selling.
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...Oil stocks took a mid-day hit today, and it will be interesting to see if that constitutes a key reversal day or a head fake. Several energy stocks I follow regularly were up strong this afternoon, then sold off, all on heavier than normal volumes.
...For instance, one of my favorites, XTO, was up a $1.91 at its top today before selling off. It recovered some in the late afternoon to close up $.74, on 6 million shares volume, as compared to its 3 month average of 3.4 million shares.
...VLO, the refinery stock, fared even worse. At its top today, it was up $1.94 to $79.70. From there it collapsed, ending down $1.11 on the day at $76.65, a cool collapse of $3.05, on 10.7 million shares volume, as compared to its 3 month average of 4.8 million shares.
...It was interesting that AIG received two upgrades today from major brokerage houses, along with a statement from NY AG Eliot Spitzer that he expected a civil settlement could be reached with the company. Some folks had feared there might be criminal investigations, and that wouldn't be good news for the markets or DaBoyz. AIG end up $2.35 a share on volume of 67 million shares, versus their 3 month average of 11 million. But, of course, it had also been down $4.46 a share Friday on volume of 70 million shares. So I'm not sure that today's action means it is out of the woods, or was just a technical rebound, or was just more distribution to the folks who bought in thinking they were getting a deal on a quality stock. I guess time will tell.
...XAU had another weak day and is still mired beneath both its 50 day and 200 day EMAs, with the 50 day EMA heading down toward the 200 day EMA, none of which is good for the gold buggers. I rarely trade gold stocks anymore. Years ago, I used to trade them regularly, but I found that for whatever reason, I didn't have success trading them...And I'm not a true believer as many of the buggers are, that gold will once again become currency. I don't think that is ever going to happen. We are indeed in a new era, and the PTB will never allow gold to become currency again. It would be disastrous for their fiat money systems. Whether that's good or bad depends on your viewpoint, I suppose.
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Links, References, Tools, Etc

FINANCIAL TOOLS
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VTO Report
http://www.vtoreport.com/index.html
One of my favorite sites, and one of the most visually appealling. This site graphically depicts some useful information, i.e., Commitment of Traders Report, and useful sentiment indicators. It also has one model trading system that refutes the theory that the markets can't be timed. It is a simple system that uses a 5 day RSI for the Nasdaq 100 (QQQQ). See the site for details. The site maintains the lists of trades the signal has generated since 1997. The system has never had a losing year, and that is pretty remarkable. The records, both wins and losses, are there for the world to see.
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READING MATERIAL RESOURCES:
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Reminiscences Of A Stock Operator, by Edwin LeFevre. A classic. A great read even if you don't trade, loaded with timeless insights. Martin Zweig, who I used to enjoy when he was a guest on Wall Street Week, and who wrote another of my favorite market books, used to give Reminiscences to all his new employees as required reading.
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The Battle for Investment Survival, by Gerald M. Loeb. This book was originally authored in 1935, and was updated a few times after that. It is mostly a collection of essays on various aspects of trading. Loeb believed in short term trading. He considered it safer than buy and hold, so it makes an interesting read on that basis, since most experts today extol the virtues of buy and hold.
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How I Made $2,000,000 In The Stock Market, by Nicolas Darvas. Another classic IMO, and also an entertaining read. This is the story of how an amateur investor, without access to the daily markets as he travelled around the world, amassed a fortune.
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Winning On Wall Street, by Martin Zweig. Another enjoyable read (and he grew up a Cleveland Indians fan). Although some of the specific techniques and tools are dated and don't work as well as they once did, the book is still valuable for demonstrating the importance of building systems to try and get an edge in trading.
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ColemanChimneyCorner Daily Musings

April 3
I read an excellent market commentary over the weekend on Louis Navellier's website. Navellier has an excellent record as a growth stock picker, and puts out a free newsletter on the site.
Link:
http://www.navellier.com/marketmail/
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Especially interesting was his take on energy prices. He believes that energy prices will be high for the forseeable future.
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I agree with that. The rise of China and India, in particular, as economic superpowers will probably keep demand strong. There will be corrections. But it appears that we are in a commodity bull market.
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China is on the road to becoming a true super power on the world scene. I also believe we are in the last days before Christ's return, and that the Chinese are referred to as a superpower in the book of Revelation. They are the one nation that could come up with a 200 million man army.
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We are told from time to time that they are slowing their economy to keep it from overheating, but I'm not sure I buy that. They are hosting the Olympics in 2008, I believe. They will be wanting to impress the world. There is a lot of infrastructure work to be done before then. As huge as they are, they can probably keep strong demand on most of the world's resources at least until then.
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One further note on Navellier's website. There is another excellent tool on that site called Stock Grader. You can enter a stock symbol and the site will return a letter grade, from A to F, for an overall grade on the stock according to Navellier's criteria. In addition, it also shows you letter grades for eight different sub-categories that go into the overall letter grade.
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I use Stock Grader quite a bit. I also keep a portfolio on that site, so I can keep track of changes to those stocks. I use it for getting grades on both long and short candidates. Best of all, Market Mail and Stock Grader are both free.
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As for the coming week, once we get the 401k and mutual fund incoming cash put into the markets, we will likely see renewed selling by the end of the week. The markets are oversold, but they are also weak, and there doesn't seem to be genuine buying enthusiasm.
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I have noticed recently that the volume on the NYSE exceeded the volume on the Nasdaq several times in the past couple of weeks. More often than not that occurs during weak market times. It happened frequently during the bear market of a couple of years ago. It happens much less frequently in good markets.
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The markets are at important short and intermediate term junctures right now. The bulls need to get a rally going, or the selloff could be severe IMO. For those who don't trade actively and can't watch the markets during the day, this period is a pretty good one to be in cash. Never forget that cash is a position, too. A zero day is disappointing, but it is better than a minus day brought about because you were in trades you shouldn't have put on in markets you shouldn't have been trading.
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Trading Styles, Methods, Thoughts, Etc

More to come here, too, as the site is new.
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I have become convinced over the years that simpler is better. I used to use a whole host of fundamentals to pick stocks, along with several of the most popular technical indicators.
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The longer I trade, the more I see that price is what matters, along with volume as a secondary indicator. Most of the rest is just bells and whistles as far as I am concerned. I'm not saying I don't use fundamentals and technicals any more, because I do. Just not as much as I used to. And I have discovered a few tricks along the way to make sure I am getting honest opinions from the institutions. I intend to share some of those as well as site develops.

Model Portfolios

Still under construction. I plan on posting model portfolios and watchlists here, and monitoring their performance. In the past, I never placed much value on paper portfolios. And I am still of the opinion that there is nothing like putting your real, hard-earned dollars out there to teach you about trading.
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I am the weak link in my trading system. My emotions are an enemy in my trading. I can be the most calm, cool and collected individual around when it is only for fun, and that is the weakness of paper trading. It does not prepare you for what it is going to feel like when the bullets start flying.
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That said, I have found that paper trading does have value. I use it for setting up different kinds of trades, then keeping track of them. I currently run one of the just-for-fun paper trading mutual funds on Marketocracy under the symbol CMF. I started it January 28 of this year. As of the close of trading April 1, it was up 5.6%. That was frustrating, since my real life trading has not fared that well.
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The Marketocracy experience has taught me some more lessons about what I need to be doing in my real life accounts, and that is valuable, paper trading or not.
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Fairy Tales, Talking Heads, Poison Pens, Etc

Free advice...
Questions that I've had from time to time when watching TV financial shows. I enjoy the interviews, I enjoy hearing the opinions and the stock picks, and I even investigate some of them. But I wonder...
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What is their motive?
Why would they give me this stock pick for free? Are they giving out these same picks to the clients who actually pay them for their counsel?
Are they being honest? Are they saying what they really think, or are they putting the information out there to bring in buyers for a stock they really want to sell?
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There was a famous trader a few years ago, I don't know if he is still out there or not, who accumulated quite a following during the bubble days of the late 90's. He was making millions, they said, and lots of people were only too glad to pay for his picks and pans. Then the authorities started after him for frontrunning trades.
They accused him of taking his position in a trade, then posting his opinion to his minions, who would all pile into the trade. This worked quite well for him, the accusers pointed out, but often not as well to those who went in after him. It worked especially well on thinly traded issues, where it didn't take much volume to make impressive moves.
What did the authorities expect him to do? Was he supposed to put his opinion out to the world, then wait for everyone else to get in before he entered? Or not get in at all, just be an information source? If he was supposed to wait, what would be an acceptable period of time?
What is the difference between what he did and what the institutional houses do every day?
Ask yourself the next time you see a broker salesman from one of the big houses on your favorite financial program:
Do you think it is reasonable to assume that his bosses already know what he is going to say and what recommendations he is going to make before he goes on the program? Or do you think that they are sitting around the TV just like you are, and asking each other, "Gee, I wonder what Bob is going to talk about today."
If you agree that it is likely his bosses already know, do you think that it is possible that they have already taken their positions in the stock that Bob is going to mention? If so, is it also possible that they have already put their PAYING clients into the position ahead of time as well before they give you this valuable free information?
And if that is the case, then what is the motive for sharing that information with TV nation? Is it to make their position increase in value? Or to bring sellers into a stock that they want to sell? Or are they just offering a public service, giving you the same information for free that clients pay them thousands of dollars for?
In this new age of disclosure, don't you just love it when the salesman recommends a stock, then says he and his firm don't have a position in it? I always want the interviewer to ask, "Why not?"
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Disclaimers, Glossary, FAQs

GLOSSARY:
DaBoyz: Players and houses big enough to move and manipulate stocks and markets.
PPT: Plunge Protection Team
PTB: Powers That Be



DISCLAIMER:
The opinions expressed on this site are just that - opinions. They are not intended to be taken as recommendations or advice.
I am wrong a lot of the time. I have learned that is nothing to be ashamed of, it is just a part of trading. If you trade, there are going to be losses.
Over the years, I have learned that I am responsible for my own choices. If I win, I get paid. If I lose, I pay. It is the same for you. If you make trades based just on what other people recommend, you deserve whatever happens.
There is a lot of information out there, some good, some bad. I read a lot. I am always looking for new ideas. But I make my own decisions. And you do, too, even if that decision is to listen to somebody else whether you should or not. If you cannot think for yourself, this game is not for you. There are too many bullies out there who make their livings taking our lunch money.