Pre-market futures are up big and then some. The SPX futures are up as much as I've seen them in a long while on the Fannie and Freddie takeover news. Since Financials are the biggest sector in the stock market, and since the SPX has the highest weighting in Financials, I'm looking for the bounce in the stock market to be led by the SPX. The Dow will probably be the next strongest mover early in the day, and the Naz will follow the Dow and the SPX. All three indexes are probably going to have a big move right out of the gate.
If European and Asian trading are any type of guideline for what to expect today, then we may see the SPX up as much as 4.00% at some point today. Most of the European and Asian markets are up between 3.5% and 4.5% in reaction to the Financial news in the U.S. markets. As I stated in the previous post, I will be looking for a bullish move today, which may carry through for several days. And I will be focused more on Financial stocks than any other area. Remember to keep this all in perspective, this doesn't change the oil and gas picture, or the consumer spending picture. But traders will be looking at this news as a potential "sign" that the Financial markets turmoil is over.....So a bullish move is on the table, but I'm not going to get completely swept away in the emotion of it all.....I want to see if there are some nice call option opportunities today, and perhaps for several days, and then I will assess it again from there.
7:30 am MT: We had a gigantic gap up on the SPX, just as I anticipated. It’s way, way too hot right now, so I will watch to see how this plays out this morning. There was also a huge gap up on the Ten-year Yield, which shows how much the focus is on Financials. I still don’t think the fundamentals have somehow magically turned completely around because the U.S. government placed Fannie and Freddie under conservatorship. So I’m not a chaser on the gap.
8:00 am MT: The market is in a gap and fade, which may find an intra-day bottom soon. I am interested in some potential Financial stocks as well as SPY and DIA. I went ahead and cherry picked some SPY and DIA calls at about 8:02 am MT. This looks like the first bounce point intra-day.
8:20 am MT: This is the first test on the intra-day charts. If the market doesn’t hold here, then it could take another hour or so to find an intra-day bottom. Oil is adding volatility to the morning as futures traders fixate on Hurricane Ike. The price of oil pushed up briefly towards $110, which put more weight on the stock market’s early fade off of the gap. Now oil has dropped back down into the $107 area. This kind of wacktivity (wacky activity) is probably going to go on for several days until Ike is sorted out.
8:35 am MT: I added to the SPY and DIA calls. This looks like the first turning point intra-day. I also nibbled on some MS calls.
9:00 am MT: I nibbled a little more on MS calls. Here are some interesting stocks I am watching:
Financials: MET, JPM, STI, RKH, PNC, MS, NTRS
Railroads: BNI, UNP, NSC
Transports: UPS
Cyclicals: IR, KMB, MMM, ITW, WHR, PCAR
Defense: NOC, RTN
Food & Beverage/Consumer Staples: KO, PEP, PG, CL
I’m especially interested in KMB and WHR this morning, besides the Financials. Retail is hot, but too hot right now, so I may just leave it alone. I nibbled on KMB and WHR calls.
9:15 am MT: I nibbled on some STI calls. The biggest news bogey of the morning was the rumor that UAUA filed for Chapter 11 bankruptcy. According to CNBC the report is untrue. It looks like someone rumored the market.....I wonder who was short the stock and getting killed recently.....If the rumor was just a rumor, you can bet the SEC will be opening an investigation today.
On a positive note, WHR looks very strong so far, I may add more to the position later in the day.
10:30 am MT: I’m not super excited about the volatility in MS, so I sold the calls for a small .12 cent loss. I don’t want to play around with that stock right now, it needed to show more intra-day strength for me to stay interested. I still like the STI calls in Financials, but I’m still of the same opinion that I was going into the day, I don’t want to get loaded up on this bounce just yet. I’m only a medium believer right now, not a strong believer.....
12:45 pm MT: Oil dropped to new lows intra-day, which is helping prop up the stock market. The Naz and Tech stocks are lagging the overall market, just as I warned. Today is not a clear-cut runaway bounce, it’s still volatile and mixed. I am nibbling here and there, but this could all break down in a hurry if traders get tired of Financials.
1:00 pm MT: I sold the WHR calls for a 1.70 profit or 35% gain intra-day. I’m bullish on the stock, but I like the gains and I’ll see if it pulls back a little before the end of the day. I’m not keen on holding a lot of positions overnight, as usual, so this begins the scaling out process.
1:15 pm MT: WHR quickly pulled back a dollar, which I had anticipated. So I nibbled back in to the same position 6% cheaper than I just sold it. If the stock holds up into the close, I will probably add a little more. This is one trade I don’t mind holding a little overnight.
1:30 pm MT: WHR took off again, so I sold the calls for another .90 cent profit or 15% gain in a few minutes. I’ll look for a pullback to take a small position overnight. I nibbled on calls for PG and PEP. Those are positions I want to hold overnight as well.
1:40 pm MT: I sold the SPY and DIA calls after several trades scaling in and scaling out. At the end of the day I was up only .09 cents due to the deeper than expected intra-day pullback. So my $90 dollar gain was pretty minimal, but I kept it green so my other trades wouldn’t take a hit. I also sold the STI calls for a nice .80 cent profit or 21% gain. I don’t feel like holding any financials overnight, even though STI looks really nice as a breakout, and might still run another couple of dollars.
2:00 pm MT: My total profit on the day was $834, which was right in line with what I wanted. I knew I wasn’t going to come in this morning and open up the barn doors and whale away on call trades. So this was a nice little day of trading. I’m also positioned well for tomorrow with three trades that I’m carrying overnight (KMB, PEP, PG), and I have an idea of what stocks I want to look at in the morning. I thought we could get a bounce today and tomorrow, which I warned about on the past post, and so far I’m taking advantage of the move pretty much the way I wanted to. I would probably have done more today if we didn’t get such a gigantic gap at the open on the DIA and SPY, that really limited what I wanted to do. Nevertheless I was able to pick and peck and punch a little here and there and walk away with more money and nice positions for tomorrow.
3:00 pm MT: Market Wrap: The SPX and Dow finished with nice bounces today, which didn’t tell the whole story. Both indexes in essence gapped out of the gate, although it won’t show as a gap on the daily charts because the chart processed the open as a big move in the first minute. Now, that wasn’t really what happened, because, for instance, the Dow showed a move of 250 points in the first minute! So what really happened, and what shows up on the DIA and SPY is a big gap and then a fade throughout the rest of the day until a final-hour rally took the Dow and SPX back near the highs of the day. The net result on the daily charts for the DIA and SPY is a Hanging Man type pattern, which differs significantly from the Morning Star/Hammer on the Dow and SPX. The Naz showed the gap and fade more realistically than the Dow and SPX. Any way you slice it, the market did bounce, but I’m not looking at this day as a sign that suddenly the Financial sector and Housing sector woes are over. However, I did view the day as a short-term bullish bounce, which I played accordingly.
Oil gyrated around quite a bit today, which was expected ahead of the Hurricane Ike uncertainty. Once again, a warning on the media, do your own homework on how things are really going with the Hurricane. The media headlines want you to believe it’s the end of the world, which dovetails with their own agenda. Hurricane Ike actually dropped a category today, which is probably why oil actually finished near the lows of the day. However, hurricanes are not entirely predictable, so oil traders will continue to gyrate and churn, and the price of oil will stay volatile on a short term basis, until traders are more certain about Hurricane Ike and the aftermath.
As it stands for tomorrow, I like Cyclicals, some Financials, a little Retail (I would like Retail more if it wasn’t a little overcooked short term), some Transports, some Consumer Staples, and perhaps a little bit of the Railroads and Defense.
Here is what I’m focused on within my Bullish Watchlist from yesterday and this morning (although I will keep an eye on everything):
Financials: STI, NTRS, PNC
Cyclicals: WHR, KMB
Consumer Staples: PEP, PG, CL
There’s more stuff than these few stocks, so I’m open minded, but in the morning I will have an eye on these.
One Final Note: I did manage to get caught up on answering your comment questions the past three posts.
Monday, September 8, 2008
Sunday, September 7, 2008
Market May Bounce Monday led by Financials
The government seized control of Fannie and Freddie to try and stem the tide of mortgage defaults, writedowns, and failings in the Financials sector. It remains to be seen what the U.S. government can do to prevent further damage to the companies, but it is significant that the government is at least creating the image of stability in the Housing and Financial sector.
Asian stocks have made the biggest jump in eight months on the news, and U.S. stock futures are up as well. As long as Hurricane Ike doesn't throw water on the Hammers from Friday, then the Dow could rally to at least 11,350 on a bounce. The SPX could take a shot at 1,260, and the Naz might reach for 2,285. If the Naz jumps as far as 2,300 on heavy volume then the index could rally as far as 2,350, but for now that scenario seems unlikely.
Look for Financial stocks to lead the way early in the day, and if Ike doesn't spike oil, then Retail, Consumer Spending, Cyclical, and Transportation sectors might make a push has well. There aren't any key Economic or Earnings Reports on Monday or Tuesday, so Financials and Hurricanes will probably dominate the news for the next couple of days.
Here is a list of interesting potential Bullish plays on Monday and Tuesday:
Financials: ICE, STI, PRU, PNC, RKH, JPM, MET, MS, MTB
Electronics/Alternative Energy: STP, SPWR
Retail: JCP, URBN, WMT
Defense: RTN, LMT, NOC
Food & Beverage: GIS
Railroads: BNI, UNP
Note possible bottoming starting: Chemicals: TRA, POT, AGU, MOS Energy: NFX, DO, RRC Coal: WLT, CNX
I'm not looking to get all giddy about calls Monday, but I think - barring an Ike spike or a news bogey - that the market will bounce Monday morning and perhaps into Tuesday. And I will be most focused on Financials for short call swings. We'll see what the new day brings.....
Asian stocks have made the biggest jump in eight months on the news, and U.S. stock futures are up as well. As long as Hurricane Ike doesn't throw water on the Hammers from Friday, then the Dow could rally to at least 11,350 on a bounce. The SPX could take a shot at 1,260, and the Naz might reach for 2,285. If the Naz jumps as far as 2,300 on heavy volume then the index could rally as far as 2,350, but for now that scenario seems unlikely.
Look for Financial stocks to lead the way early in the day, and if Ike doesn't spike oil, then Retail, Consumer Spending, Cyclical, and Transportation sectors might make a push has well. There aren't any key Economic or Earnings Reports on Monday or Tuesday, so Financials and Hurricanes will probably dominate the news for the next couple of days.
Here is a list of interesting potential Bullish plays on Monday and Tuesday:
Financials: ICE, STI, PRU, PNC, RKH, JPM, MET, MS, MTB
Electronics/Alternative Energy: STP, SPWR
Retail: JCP, URBN, WMT
Defense: RTN, LMT, NOC
Food & Beverage: GIS
Railroads: BNI, UNP
Note possible bottoming starting: Chemicals: TRA, POT, AGU, MOS Energy: NFX, DO, RRC Coal: WLT, CNX
I'm not looking to get all giddy about calls Monday, but I think - barring an Ike spike or a news bogey - that the market will bounce Monday morning and perhaps into Tuesday. And I will be most focused on Financials for short call swings. We'll see what the new day brings.....
Friday, September 5, 2008
Employment Report Much Worse than Expected
7:00 am MT: Pre-Market: The August Employment Report showed a drop in Non-farm Payrolls of 84k versus the 75k expected, which is enough to push the market down. But the Unemployment Rate jumped to 6.1% versus a 5.7% expected, which is putting the big whammy on pre-market futures.
Expect the major indexes to drop hard out of the gate, and to test the next levels of support early in the day. There's not much else to say.....this is shaping up to be a big sell-off this morning. The only thing I would caution about is that a sharp enough drop early could create a short term (but not intermediate term) selling climax. So if the Dow is down several hundred points and hits a key support, then watch for shorts to cover just on a technical climax and for no other reason. The Big Picture remains bearish, however, and today will probably move my posture even further into intermediate term Bearish. With the Hurricanes, and the possibility of catastrophic infrastructure damage due next week, it's hard to see a scenario where my posture turns bullish, at least for another week.
Thursday, September 4, 2008
Big Money Dumps the Market on Heavy Volume
7:00 am MT: Pre-Market: August Same Store Sales are reporting in worse than expected, so I'm going to be cautious on any Retail stocks this morning. I have several Retail stocks on my Bullish Watchlist from yesterday, but I want to see how they hold up this morning before I decide whether or not I want to play calls on them. As has been the case recently, the dropping price of oil could offset the pessimism, so we'll see how this all plays out this morning. For now, at least early in the trading day, I am just going to watch Retail and not play calls in that sector.
Weekly Jobless Claims took a jump to 444k versus the 420k expected. That was the first jump, and the first miss in several weeks. In addition, the ADP Employment Report missed expectations slightly, although the ADP report tends to be somewhat non-predictive. The negative news in employment also might keep pressure on Retail, Consumer Spending, and the market. Traders could very likely take one of two directions today. One is to wait and see how things go with the Employment Report tomorrow, which is the biggest economic report of the month, and is now in doubt.....Or two, they might decide that they don't want to wait and see how things go and sell stocks today on the speculation that the report tomorrow will miss expectations.
I'm guessing that the only thing that will prop the market up today and push it into the green is the sentiment among Big Money that the forward looking outlook is better than the backward looking outlook because of the drop in oil prices. Otherwise, the Retail comps and Employment numbers from this morning will probably keep the market grinding and consolidating today at best, and selling off at worst.
I know I keep saying this, but don't get too loaded up on your trading one way or another. If you're a directional trader, come in with short, quick swings and then hit it and get out. So if I play calls today because a drop in oil causes the market to push into the green, it will still be smaller, quicker trades. As it stands right now, I'm not anticipating doing much this morning until I see how this all sorts out.
8:45 am MT: The Dow cracked down through 11,400 and that’s it, the day is likely to finish bearish. The Naz is especially ugly. Selling is across the board. I speculated this might happen so today continues the put trading for me. One interesting stock on the bullish side is EL, which is showing amazing resilience. I have some calls on EL which I will sell later today.
8:50 am MT: I sold the PXP puts. The total trade was a 1.40 profit or 37% gain.
9:20 am MT: I sold the SWN put for a profit of .30 or 10% gain from yesterday afternoon.
10:00 am MT: Big Money may have paused yesterday, but they ramped up the selling today to continue the theme from Tuesday. Institutions are selling regardless of what they see in oil, which is actually down slightly. I have seen this behavior many times before. Fast Money and Retail Traders drift the market up in August and then Big Money comes back and slams the dumb money after Labor Day. It’s almost like they go away knowing that the cult traders will run up stocks to higher prices and then Big Money comes back and says “thank-you very much” and takes their profits. There is too much chart damage out there for the market to come back today. My market posture is shifting from intermediate term Neutral to Choppy to intermediate term Neutral to Bearish. We may see a test of the July lows. The Naz is headed for a round trip in a little over a month. So much for the Top Gun Traders.....Fast Money took the Naz up sharply on lighter volume and Big Money took it right back down on heavier volume.
11:15 am MT: I sold the NUE puts. The total trade was a 1.00 profit or 22% gain.
1:30 pm MT: I sold the EL calls for a .55 cent profit or 25% gain from yesterday. I was breakeven on the earlier calls on EL. I was amazed at the stock’s price action today in the face of the fierce selling across the rest of the market. But I’ll take the profit as a pleasant surprise and move on.
3:00 pm MT: Market Wrap: The market has officially gone IT Neutral to Bearish and I’m pretty close to plain old IT Bearish. Selling volume today was very heavy across the board. Big Money tipped its hand on Monday, and they confirmed their sentiment today. The inverse ETF of the SPX is the SDS and that is as classic a bullish breakout as you can draw up. So the market is at a pretty serious risk for a downtrend from here. A test of the July lows is definitely a good possibility, the NDX is almost there! We will have to see a good Employment Report tomorrow morning to slow or stop the selling. In addition, traders will probably be in no mood to hold much ahead of the weekend with Hurricane Hanna bearing down on the East Coast. And Hanna isn’t the monster, it’s Ike coming right behind. Hurricane Ike looks like it could be extremely serious, and traders will be paying attention to the Hurricanes next week. Normally Hurricane season garners a modest amount of interest from traders, but with a U.S. and global economy that is so sensitive to oil right now, the Hurricanes, and especially Ike, will be front and center for much of next week. So there you have it.....Even with a decent Employment Report in the morning we could still just see some wiggling and consolidating but not serious buying. Shorts may cover ahead of the weekend a little bit, but the Bulls won’t be very excited about the market until the Employment and Oil situation clears up.
It will probably take a pretty amazing Jobs Report tomorrow to get the Bulls excited and buying enough to offset the big, heavy volume sell-off from today. I speculate that we will see a decent Jobs Report and probably not a catastrophic Jobs Report. However, any miss on the numbers and the market is set to drop to the next support levels, especially a big miss. Employment and Hurricanes will be the theme for tomorrow and into next week. The next catalyst after that will probably be the FOMC Meeting on September 16, but that is shaping up to be complete non-event. If the Hurricanes don’t do nearly the damage that is expected, then oil could sell off and the stock market could catch a nice tailwind. But we won’t know the aftermath of the Hurricanes until next week. So for now, I’m more interested in puts than calls, although it won’t surprise me if we get a bounce in the next few trading days because of the breadth and depth of the recent sell-off.
Weekly Jobless Claims took a jump to 444k versus the 420k expected. That was the first jump, and the first miss in several weeks. In addition, the ADP Employment Report missed expectations slightly, although the ADP report tends to be somewhat non-predictive. The negative news in employment also might keep pressure on Retail, Consumer Spending, and the market. Traders could very likely take one of two directions today. One is to wait and see how things go with the Employment Report tomorrow, which is the biggest economic report of the month, and is now in doubt.....Or two, they might decide that they don't want to wait and see how things go and sell stocks today on the speculation that the report tomorrow will miss expectations.
I'm guessing that the only thing that will prop the market up today and push it into the green is the sentiment among Big Money that the forward looking outlook is better than the backward looking outlook because of the drop in oil prices. Otherwise, the Retail comps and Employment numbers from this morning will probably keep the market grinding and consolidating today at best, and selling off at worst.
I know I keep saying this, but don't get too loaded up on your trading one way or another. If you're a directional trader, come in with short, quick swings and then hit it and get out. So if I play calls today because a drop in oil causes the market to push into the green, it will still be smaller, quicker trades. As it stands right now, I'm not anticipating doing much this morning until I see how this all sorts out.
8:45 am MT: The Dow cracked down through 11,400 and that’s it, the day is likely to finish bearish. The Naz is especially ugly. Selling is across the board. I speculated this might happen so today continues the put trading for me. One interesting stock on the bullish side is EL, which is showing amazing resilience. I have some calls on EL which I will sell later today.
8:50 am MT: I sold the PXP puts. The total trade was a 1.40 profit or 37% gain.
9:20 am MT: I sold the SWN put for a profit of .30 or 10% gain from yesterday afternoon.
10:00 am MT: Big Money may have paused yesterday, but they ramped up the selling today to continue the theme from Tuesday. Institutions are selling regardless of what they see in oil, which is actually down slightly. I have seen this behavior many times before. Fast Money and Retail Traders drift the market up in August and then Big Money comes back and slams the dumb money after Labor Day. It’s almost like they go away knowing that the cult traders will run up stocks to higher prices and then Big Money comes back and says “thank-you very much” and takes their profits. There is too much chart damage out there for the market to come back today. My market posture is shifting from intermediate term Neutral to Choppy to intermediate term Neutral to Bearish. We may see a test of the July lows. The Naz is headed for a round trip in a little over a month. So much for the Top Gun Traders.....Fast Money took the Naz up sharply on lighter volume and Big Money took it right back down on heavier volume.
11:15 am MT: I sold the NUE puts. The total trade was a 1.00 profit or 22% gain.
1:30 pm MT: I sold the EL calls for a .55 cent profit or 25% gain from yesterday. I was breakeven on the earlier calls on EL. I was amazed at the stock’s price action today in the face of the fierce selling across the rest of the market. But I’ll take the profit as a pleasant surprise and move on.
3:00 pm MT: Market Wrap: The market has officially gone IT Neutral to Bearish and I’m pretty close to plain old IT Bearish. Selling volume today was very heavy across the board. Big Money tipped its hand on Monday, and they confirmed their sentiment today. The inverse ETF of the SPX is the SDS and that is as classic a bullish breakout as you can draw up. So the market is at a pretty serious risk for a downtrend from here. A test of the July lows is definitely a good possibility, the NDX is almost there! We will have to see a good Employment Report tomorrow morning to slow or stop the selling. In addition, traders will probably be in no mood to hold much ahead of the weekend with Hurricane Hanna bearing down on the East Coast. And Hanna isn’t the monster, it’s Ike coming right behind. Hurricane Ike looks like it could be extremely serious, and traders will be paying attention to the Hurricanes next week. Normally Hurricane season garners a modest amount of interest from traders, but with a U.S. and global economy that is so sensitive to oil right now, the Hurricanes, and especially Ike, will be front and center for much of next week. So there you have it.....Even with a decent Employment Report in the morning we could still just see some wiggling and consolidating but not serious buying. Shorts may cover ahead of the weekend a little bit, but the Bulls won’t be very excited about the market until the Employment and Oil situation clears up.
It will probably take a pretty amazing Jobs Report tomorrow to get the Bulls excited and buying enough to offset the big, heavy volume sell-off from today. I speculate that we will see a decent Jobs Report and probably not a catastrophic Jobs Report. However, any miss on the numbers and the market is set to drop to the next support levels, especially a big miss. Employment and Hurricanes will be the theme for tomorrow and into next week. The next catalyst after that will probably be the FOMC Meeting on September 16, but that is shaping up to be complete non-event. If the Hurricanes don’t do nearly the damage that is expected, then oil could sell off and the stock market could catch a nice tailwind. But we won’t know the aftermath of the Hurricanes until next week. So for now, I’m more interested in puts than calls, although it won’t surprise me if we get a bounce in the next few trading days because of the breadth and depth of the recent sell-off.
Wednesday, September 3, 2008
Market Consolidates Ahead of Next Move
Stock market futures are down pre-market as traders appear to be ready to follow through from yesterday's selling. There are a couple of economic reports due out during the day today, but they may not have much impact unless they report shocking numbers, which is unlikely. Big Money Traders look like they are taking a glass is half empty approach so far in September. That means we may see some more technical selling this morning until we reach short term support levels. The next couple of days become important in that if the early September selling doesn't find a floor soon, the market could go in to a donwtrend. I'm still taking the view of choppy or neutral conditions rather than trending conditions until the market shows otherwise.
8:15 am MT: I nibbled on some SCHN and FLR puts. The market is having a quiet morning, which is the wiggle I expected after the big intra-day reversal yesterday. Also, the Oil Inventory Report was pushed back to Thursday due to the Labor Day Holiday. So trading might star quiet for the next several hours. I am also interested in MOS puts but I missed the first early morning wiggle while I was (paper) trading other stocks. If it wiggles one more time, I may pick up some puts.
8:35 am MT: I picked up a very small MOS put position just so I don’t miss anything. It looks very weak right now. I also nibbled on an EL call. I like how the stock is holding up despite the choppy market conditions.
8:45 am MT: MOS did what I thought it would, it went frantic intra-day. So I sold the put for a .50 cent profit or 6% gain in just 10 minutes. I think it will bounce back a little and I can buy the put back cheaper in a few minutes.
9:00 am – 11:00 am MT: I sold SCHN into the big intra-day drop. I also bought back into Steel with some NUE puts. In addition, I sold some of the PXP and FLR puts and the rest of the NE puts. I bought some SWN puts.
1:45 pm MT: I sold the rest of the NFX and FLR puts. I am only holding small put positions on PXP (Energy) and NUE (Steel) overnight. I sold all the rest of the Energy and Commodity puts.
Here are the final tallies on the end of day sells: NFX was a 1.15 profit or 40% gain. NE was a .50 cent profit or 16% gain. SCHN was a 1.20 profit or 23.5% gain. And FLR was a 2.00 profit or 34% gain.
3:00 pm MT: Market Wrap: Today was a consolidation day after the big intra-day reversal yesterday. The Naz had a little more downward momentum than the Dow or SPX. The Naz tested support at the bottom end of the near term consolidation channel. Oil also had a consolidation day, which was a catalyst behind the narrower stock market range. Factory Orders came in slightly better than expected, which continued the trend of decent economic reports the past several weeks. The Fed’s Beige Book showed economic slowing, but there wasn’t anything in the report that most of the trading world didn’t already know. Our economy is doing what it has been doing all year, crunching along. We never reached recessionary levels, but we also haven’t seen growth and expansion. And therefore, the drum beat goes on.....
8:15 am MT: I nibbled on some SCHN and FLR puts. The market is having a quiet morning, which is the wiggle I expected after the big intra-day reversal yesterday. Also, the Oil Inventory Report was pushed back to Thursday due to the Labor Day Holiday. So trading might star quiet for the next several hours. I am also interested in MOS puts but I missed the first early morning wiggle while I was (paper) trading other stocks. If it wiggles one more time, I may pick up some puts.
8:35 am MT: I picked up a very small MOS put position just so I don’t miss anything. It looks very weak right now. I also nibbled on an EL call. I like how the stock is holding up despite the choppy market conditions.
8:45 am MT: MOS did what I thought it would, it went frantic intra-day. So I sold the put for a .50 cent profit or 6% gain in just 10 minutes. I think it will bounce back a little and I can buy the put back cheaper in a few minutes.
9:00 am – 11:00 am MT: I sold SCHN into the big intra-day drop. I also bought back into Steel with some NUE puts. In addition, I sold some of the PXP and FLR puts and the rest of the NE puts. I bought some SWN puts.
1:45 pm MT: I sold the rest of the NFX and FLR puts. I am only holding small put positions on PXP (Energy) and NUE (Steel) overnight. I sold all the rest of the Energy and Commodity puts.
Here are the final tallies on the end of day sells: NFX was a 1.15 profit or 40% gain. NE was a .50 cent profit or 16% gain. SCHN was a 1.20 profit or 23.5% gain. And FLR was a 2.00 profit or 34% gain.
3:00 pm MT: Market Wrap: Today was a consolidation day after the big intra-day reversal yesterday. The Naz had a little more downward momentum than the Dow or SPX. The Naz tested support at the bottom end of the near term consolidation channel. Oil also had a consolidation day, which was a catalyst behind the narrower stock market range. Factory Orders came in slightly better than expected, which continued the trend of decent economic reports the past several weeks. The Fed’s Beige Book showed economic slowing, but there wasn’t anything in the report that most of the trading world didn’t already know. Our economy is doing what it has been doing all year, crunching along. We never reached recessionary levels, but we also haven’t seen growth and expansion. And therefore, the drum beat goes on.....
Here is a chart of the Naz showing the drop to the low end of the near-term channel. If the Naz and the Market hold true to the current choppier conditions, then it's probable that the Naz (and the Market) bounce a little tomorrow. As always, we shall see.....
(click on image to enlarge)
(click on image to enlarge)
If the market does wiggle up a little tomorrow, or even bounce for a day or two, then I want to start switching away from yesterday and today's Bearish Watchlist by tomorrow. And I want to start nibbling on some potential Bullish Watchlist stocks tomorrow that I sell by Friday. I finished out most of my puts today, and I may complete all the puts by tomorrow. I might also look at some short swing calls tomorrow and into Friday. Again, we shall see.....I want to be ready if it does play out that way.
Here is an interesting list of Bullish Stocks that I will keep an eye on tomorrow:
Retail: EL, TIF, SHLD, BBY, RL, (also interesting but a bit extended are: JCP, KSS, and JWN)
Food & Beverage/Consumer Staples: PG, CL, PEP
Financials: STI, PNC, (also interesting but too extended are: MCO, PRU, )
Transports: FDX is interesting but not a high grade trade
Defense: LMT is interesting but may not be able to hold this angle much longer
Cyclicals: UTX
Also note: MDT, PCP is interesting at the gap, but not a high grade trade, ADBE is holding up well considering what's been happening in Tech.
Now, I don't know what will play out tomorrow because I don't have a time machine....but if the Energy and Commodity stocks look like they want to take one last leg down then I will attack that area with puts intra-day. If the market looks like it wants to bounce up for a day or two, then I will probably attack a few calls from the Bullish Watchlist. We'll see what happens.
Here is an interesting list of Bullish Stocks that I will keep an eye on tomorrow:
Retail: EL, TIF, SHLD, BBY, RL, (also interesting but a bit extended are: JCP, KSS, and JWN)
Food & Beverage/Consumer Staples: PG, CL, PEP
Financials: STI, PNC, (also interesting but too extended are: MCO, PRU, )
Transports: FDX is interesting but not a high grade trade
Defense: LMT is interesting but may not be able to hold this angle much longer
Cyclicals: UTX
Also note: MDT, PCP is interesting at the gap, but not a high grade trade, ADBE is holding up well considering what's been happening in Tech.
Now, I don't know what will play out tomorrow because I don't have a time machine....but if the Energy and Commodity stocks look like they want to take one last leg down then I will attack that area with puts intra-day. If the market looks like it wants to bounce up for a day or two, then I will probably attack a few calls from the Bullish Watchlist. We'll see what happens.
Tuesday, September 2, 2008
Stocks Chop and Fade into a Bearish Day
Hurricane Gustav didn't do as much damage as expected, which has traders dumping Oil futures down through several support levels all the way to the $108 area. Commodities futures in general are seeing quite a bit of selling this morning. Stock futures are up sharply as a result of the Oil and Commodities selling.
We will get the ISM Index report 30m after the open, but if recent trends in economic reports hold up, we will probably see a better than expected report. The table is set for a pretty big bullish day if all the early morning news holds up. The ISM will have a lot to say about things, but if Oil keeps dropping towards the next support at $105, then traders will probably be focused on that positive development more than any other news.
8:00 am MT: Oil smacked down towards my next support target of $105. Energy and Commodity stocks gapped down hard at the open. Coal and Chemicals are getting smacked especially hard, which isn’t surprising since those sectors have probably seen as much cult trading as any other the past several months. Gold is also down as traders move away from the “flight to safety trade.” Transports and Retail and other Consumer Spending sectors like Casinos, Fast Food, Consumer Staples, and Food & Beverage are jumping up sharply on the drop in oil prices.
8:15 am – 9:00 am MT: I nibbled on calls for JCP, BBY, MCD, and FDX. I thought about puts on Chemicals, Coal, and Energy but I want to be able to watch those more closely for short swings, and I don’t dare jump those when I can’t give all my focus to the trades.
The ISM Index reported pretty much in-line with expectations. I was expecting the focus to be on Oil anyway, so this pretty much seals the deal. Traders will be watching the battle at $105 on Oil Futures for clues on intra-day price action in stocks. In the smaller, intra-day picture, Oil held $105.50 and is trying to Hammer. In the bigger, macro picture, Oil is still in a downtrend, even if it holds $105 today and bounces, so Retail and Consumer Spending sectors will continue to benefit regardless of the intra-day rattling around with Energy Traders.
10:00 am MT: The Hammer bounce is still holding in Oil. Retail and Consumer Spending continue to hold up, and Energy and Commodity stocks are still down, so we shall see if it finishes out the day this way. Financials are trying to make a little noise on the continuation of the good economic news from the end of last week, but nothing really significant. Tech is way too squishy right now. I just don’t want to touch it. Even if I was wearing rubber gloves, I still wouldn’t touch Tech today. The Dow is holding up the best of the major indexes with some of the cyclical stocks keeping the index afloat.
I can still see the crosscurrents for a choppy market playing around out there. Oil came down hard on Gustav sputtering out, but the economic reports lately keep coming in at or better than expected, which could keep demand for oil up a bit. So some sectors like Retail and Consumer Spending are catching a tailwind, and some sectors like Energy and Commodities are selling, but there’s a whole lot in between that’s too choppy still, like the two biggest sectors in the world: Financials and Tech.
By the way, did the media overhype Gustav or what? At some point you would think that every big-time trader in the world would realize that media sells advertising and isn’t interested in informing the public. That’s just not their business. Their business is to suck in viewers through hysteria, fear, anger, hype, catastrophes, intrigue, depravity, and sizzle among other tactics. Once they get eyeballs, they sell advertising. That’s it. That’s the sum total of the mystery. I kept saying last week not to get sucked in to a big oil move just because the media was promoting disaster in New Orleans. I wanted to wait and see how it really played out with the hurricane, and of course, the media was wrong, again.....My favorite hysteria moment was watching one reporter literally freaking out because he spotted one person in the water. It didn’t matter that the storm wasn’t blowing very hard, and the man in the water had a live vest on, and was firmly secured to a tow line, and was probably working on something in the water on purpose.....the reporter kept right on squealing and freaking like he just witnessed the most dramatic moment since the Hindenburg! My second favorite hysteria moment was the AP showing a picture of a woman clinging desperately to her two cats with a look of pure anguish on her face three days AHEAD of when the storm hit and people were calmly evacuating. I mean, I have a cute little dog that I care about, and would want to protect if a storm was coming. But I wouldn’t expect the picture of me carrying my dog to her kennel so I could drive her and my family out of town to make the front page of the news! So there you have it, once again the media was NOT the place to get the news you needed to help you with your trading. If I traded off of what I saw portrayed in the media, I would have sold my home, car, and a few redundant body parts so I could throw everything I had into calls on Energy and Commodity stocks and puts on Insurance stocks. And I would have gotten absolutely killed in my trading account, and I mean OBLITERATED if I had traded what I saw coming out of the media.
10:30 am MT: The SPX took a key leg down intra-day, so this is it for me, confirmation that we are still in chop and slop. I refuse to get loaded up on my trading right now, which is why I nibbled lightly this morning. I will watch the Retail, Leisure, and Transport calls from this morning for possible exits before the close. I took small positions, and I may not make anything off of the trades, but I also risked very little. Traders are still dumping Energy and Commodity stocks despite the intra-day bounce in oil, which is significant to me. I just don’t think Big Money has much of a taste for stocks right now. There are little sector moves here and there, but traders are acting squeamish about owning stocks. Energy and Commodity stocks look like they are taking another leg down, but the overall stock market is not benefiting much from the move down. I may look at puts on Energy and Commodity stocks if we get a another swing up intra-day, but I don’t feel like chasing anything new right now, although I would keep riding the puts if I was in them already.
1:45 pm MT: I sold all four nibblers from this morning. I lost .20 cents on JCP and FDX. I lost .25 cents on BBY, and I lost .55 cents on MCD. The total losses were only $280 but it confirmed for me that Big Money is not coming back to buy the market after the summer vacation. I still don’t see anything that is changing my opinion of a potentially choppy week.
I don’t feel like holding big positions overnight, but I am interested in puts on Coal, Chemicals, and Energy. I went ahead and nibbled on puts for PXP, NFX, and NE.
3:00 pm MT: Market Wrap: Oil bounced back intra-day right in the area that I speculated could be support. Oil Futures finished the day with a Hammer-like candlestick. The stock market took an ugly turn shortly after the open, and the Naz looked especially sick as it sold off sharply from the high. All three indexes finished in the red. Most elevator analysis that you see tonight will blah blah blah about some goofball reason or other for the market gyrations. The real reason was that Big Money came back from summer break and did what they often do, which is sell in September. They had every chance and reason to buy this morning, but Big Money just kept selling into every rally intra-day. That ought to tell you what Smart Money thinks right now.....I know I keep saying this, but I’ve been warning since last week that we were going into chop and slop, and here we are, in the middle of chop and slop. I’m not spectacularly bearish either, especially with the nice drop in oil prices the past six weeks.
As far as oil goes, Boone Pickens was out yapping again on CNBC about how he thinks crude won’t go below $100. That was a really daring statement for him since most astute chartists on the planet were already guessing that the speculative froth on top of the fundamental price of oil would take us down to $90 - $100 from the $145 - $150 area. But, since Boone likes the face time and CNBC sells advertising, then suddenly his comment was big news today. The general yappity yapping was enough to ping oil right off the $105 support area, although we could still drift down a few more dollars eventually. My lowest target on oil is still the $95 - $100 area, although Boone is claiming that OPEC will cut supply if we go that far, which is probably correct.
So I’m not bullish because Big Money is not bullish, and I’m not bearish because oil has come down sharply off the $148 high. And I’m not bullish because it’s September, and I’m not bearish because Durable Orders, GDP, and the ISM Index are all showing an economy that is holding up. And I’m not bullish because Construction Spending and Housing continue to crunch through a bearish Real Estate market, and I’m not bearish because interest rates are relatively low. And I’m not bullish because Banks and Financial institutions still have hundreds of billions of dollars to still write down, and I’m not bearish because this is America and still the most resilient economy in the world. We’ll see how things go in September, but for now I’m anticipating more short swing trading and smaller positions. We may see more non-trending conditions for the next few weeks, but that didn’t stop me from having a good summer of swing trading.
Here is an interesting Bearish Watchlist for the next couple of days (I didn’t make a Bullish Watchlist even though I created a list of Bullish stocks - because I just don’t see playing calls as a good idea for the next few days):
Coal: ACI, MEE, BTU, CNX
Energy: NFX, XTO, ESV, SWN, PXP, RRC, NE, CHK, PXD, CAM, COP, DO, SLB, SII, BHI
Chemicals: CF, POT, AGU, MOS, TRA
Steel: X, SCHN
Gold: AEM, GG
Construction: FWLT, FLR
Note: JEC (broke a Triangle)
If I see a little wiggle back on Coal, Energy, Chemcals, Steel, and Construction I will look at those areas for short swing puts, perhaps Tuesday to Wednesday or so. Today they got a little oversold intra-day, so I want a nice wiggle tomorrow before entering and looking for one more day down, perhaps two days at the most.
We will get the ISM Index report 30m after the open, but if recent trends in economic reports hold up, we will probably see a better than expected report. The table is set for a pretty big bullish day if all the early morning news holds up. The ISM will have a lot to say about things, but if Oil keeps dropping towards the next support at $105, then traders will probably be focused on that positive development more than any other news.
8:00 am MT: Oil smacked down towards my next support target of $105. Energy and Commodity stocks gapped down hard at the open. Coal and Chemicals are getting smacked especially hard, which isn’t surprising since those sectors have probably seen as much cult trading as any other the past several months. Gold is also down as traders move away from the “flight to safety trade.” Transports and Retail and other Consumer Spending sectors like Casinos, Fast Food, Consumer Staples, and Food & Beverage are jumping up sharply on the drop in oil prices.
8:15 am – 9:00 am MT: I nibbled on calls for JCP, BBY, MCD, and FDX. I thought about puts on Chemicals, Coal, and Energy but I want to be able to watch those more closely for short swings, and I don’t dare jump those when I can’t give all my focus to the trades.
The ISM Index reported pretty much in-line with expectations. I was expecting the focus to be on Oil anyway, so this pretty much seals the deal. Traders will be watching the battle at $105 on Oil Futures for clues on intra-day price action in stocks. In the smaller, intra-day picture, Oil held $105.50 and is trying to Hammer. In the bigger, macro picture, Oil is still in a downtrend, even if it holds $105 today and bounces, so Retail and Consumer Spending sectors will continue to benefit regardless of the intra-day rattling around with Energy Traders.
10:00 am MT: The Hammer bounce is still holding in Oil. Retail and Consumer Spending continue to hold up, and Energy and Commodity stocks are still down, so we shall see if it finishes out the day this way. Financials are trying to make a little noise on the continuation of the good economic news from the end of last week, but nothing really significant. Tech is way too squishy right now. I just don’t want to touch it. Even if I was wearing rubber gloves, I still wouldn’t touch Tech today. The Dow is holding up the best of the major indexes with some of the cyclical stocks keeping the index afloat.
I can still see the crosscurrents for a choppy market playing around out there. Oil came down hard on Gustav sputtering out, but the economic reports lately keep coming in at or better than expected, which could keep demand for oil up a bit. So some sectors like Retail and Consumer Spending are catching a tailwind, and some sectors like Energy and Commodities are selling, but there’s a whole lot in between that’s too choppy still, like the two biggest sectors in the world: Financials and Tech.
By the way, did the media overhype Gustav or what? At some point you would think that every big-time trader in the world would realize that media sells advertising and isn’t interested in informing the public. That’s just not their business. Their business is to suck in viewers through hysteria, fear, anger, hype, catastrophes, intrigue, depravity, and sizzle among other tactics. Once they get eyeballs, they sell advertising. That’s it. That’s the sum total of the mystery. I kept saying last week not to get sucked in to a big oil move just because the media was promoting disaster in New Orleans. I wanted to wait and see how it really played out with the hurricane, and of course, the media was wrong, again.....My favorite hysteria moment was watching one reporter literally freaking out because he spotted one person in the water. It didn’t matter that the storm wasn’t blowing very hard, and the man in the water had a live vest on, and was firmly secured to a tow line, and was probably working on something in the water on purpose.....the reporter kept right on squealing and freaking like he just witnessed the most dramatic moment since the Hindenburg! My second favorite hysteria moment was the AP showing a picture of a woman clinging desperately to her two cats with a look of pure anguish on her face three days AHEAD of when the storm hit and people were calmly evacuating. I mean, I have a cute little dog that I care about, and would want to protect if a storm was coming. But I wouldn’t expect the picture of me carrying my dog to her kennel so I could drive her and my family out of town to make the front page of the news! So there you have it, once again the media was NOT the place to get the news you needed to help you with your trading. If I traded off of what I saw portrayed in the media, I would have sold my home, car, and a few redundant body parts so I could throw everything I had into calls on Energy and Commodity stocks and puts on Insurance stocks. And I would have gotten absolutely killed in my trading account, and I mean OBLITERATED if I had traded what I saw coming out of the media.
10:30 am MT: The SPX took a key leg down intra-day, so this is it for me, confirmation that we are still in chop and slop. I refuse to get loaded up on my trading right now, which is why I nibbled lightly this morning. I will watch the Retail, Leisure, and Transport calls from this morning for possible exits before the close. I took small positions, and I may not make anything off of the trades, but I also risked very little. Traders are still dumping Energy and Commodity stocks despite the intra-day bounce in oil, which is significant to me. I just don’t think Big Money has much of a taste for stocks right now. There are little sector moves here and there, but traders are acting squeamish about owning stocks. Energy and Commodity stocks look like they are taking another leg down, but the overall stock market is not benefiting much from the move down. I may look at puts on Energy and Commodity stocks if we get a another swing up intra-day, but I don’t feel like chasing anything new right now, although I would keep riding the puts if I was in them already.
1:45 pm MT: I sold all four nibblers from this morning. I lost .20 cents on JCP and FDX. I lost .25 cents on BBY, and I lost .55 cents on MCD. The total losses were only $280 but it confirmed for me that Big Money is not coming back to buy the market after the summer vacation. I still don’t see anything that is changing my opinion of a potentially choppy week.
I don’t feel like holding big positions overnight, but I am interested in puts on Coal, Chemicals, and Energy. I went ahead and nibbled on puts for PXP, NFX, and NE.
3:00 pm MT: Market Wrap: Oil bounced back intra-day right in the area that I speculated could be support. Oil Futures finished the day with a Hammer-like candlestick. The stock market took an ugly turn shortly after the open, and the Naz looked especially sick as it sold off sharply from the high. All three indexes finished in the red. Most elevator analysis that you see tonight will blah blah blah about some goofball reason or other for the market gyrations. The real reason was that Big Money came back from summer break and did what they often do, which is sell in September. They had every chance and reason to buy this morning, but Big Money just kept selling into every rally intra-day. That ought to tell you what Smart Money thinks right now.....I know I keep saying this, but I’ve been warning since last week that we were going into chop and slop, and here we are, in the middle of chop and slop. I’m not spectacularly bearish either, especially with the nice drop in oil prices the past six weeks.
As far as oil goes, Boone Pickens was out yapping again on CNBC about how he thinks crude won’t go below $100. That was a really daring statement for him since most astute chartists on the planet were already guessing that the speculative froth on top of the fundamental price of oil would take us down to $90 - $100 from the $145 - $150 area. But, since Boone likes the face time and CNBC sells advertising, then suddenly his comment was big news today. The general yappity yapping was enough to ping oil right off the $105 support area, although we could still drift down a few more dollars eventually. My lowest target on oil is still the $95 - $100 area, although Boone is claiming that OPEC will cut supply if we go that far, which is probably correct.
So I’m not bullish because Big Money is not bullish, and I’m not bearish because oil has come down sharply off the $148 high. And I’m not bullish because it’s September, and I’m not bearish because Durable Orders, GDP, and the ISM Index are all showing an economy that is holding up. And I’m not bullish because Construction Spending and Housing continue to crunch through a bearish Real Estate market, and I’m not bearish because interest rates are relatively low. And I’m not bullish because Banks and Financial institutions still have hundreds of billions of dollars to still write down, and I’m not bearish because this is America and still the most resilient economy in the world. We’ll see how things go in September, but for now I’m anticipating more short swing trading and smaller positions. We may see more non-trending conditions for the next few weeks, but that didn’t stop me from having a good summer of swing trading.
Here is an interesting Bearish Watchlist for the next couple of days (I didn’t make a Bullish Watchlist even though I created a list of Bullish stocks - because I just don’t see playing calls as a good idea for the next few days):
Coal: ACI, MEE, BTU, CNX
Energy: NFX, XTO, ESV, SWN, PXP, RRC, NE, CHK, PXD, CAM, COP, DO, SLB, SII, BHI
Chemicals: CF, POT, AGU, MOS, TRA
Steel: X, SCHN
Gold: AEM, GG
Construction: FWLT, FLR
Note: JEC (broke a Triangle)
If I see a little wiggle back on Coal, Energy, Chemcals, Steel, and Construction I will look at those areas for short swing puts, perhaps Tuesday to Wednesday or so. Today they got a little oversold intra-day, so I want a nice wiggle tomorrow before entering and looking for one more day down, perhaps two days at the most.
Monday, September 1, 2008
Coming Back From Labor Day
Tuesday is the beginning of some bigger money starting to come back in to the market from summer vacations. The process will take about a week and we should be back at full volume.
Also, tomorrow we will see how oil responds to any damage from Hurricane Gustav. In addition, the ISM Report kicks off a heavy week of economic reports.
I expect some sloshing, chopping, pushing, and gyrating as all the above factors churn and boil in the giant stock market pot. We'll see if any type of direction emerges from this upcoming week of activity.
I will be back to business as usual tomorrow. So I'll work up a watchlist and nibble around on some paper trades and start posting things up again.
Also, tomorrow we will see how oil responds to any damage from Hurricane Gustav. In addition, the ISM Report kicks off a heavy week of economic reports.
I expect some sloshing, chopping, pushing, and gyrating as all the above factors churn and boil in the giant stock market pot. We'll see if any type of direction emerges from this upcoming week of activity.
I will be back to business as usual tomorrow. So I'll work up a watchlist and nibble around on some paper trades and start posting things up again.
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