Update 12/30/08

I'll be back with updated holdings and new signals for next Monday. Until then, farewell 2008! I'd say good riddance, but I think next year at this time we'll be looking back fondly.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
LIHR	16.21	21.04	+29.8%	18.76	Consider selling on a close < 20.32	Chart
FAF	28.07	28.18	+0.4%	27.19	Consider selling on a close < 27.43	Chart

Update 12/29/08

Sold DZZ for a 1R loss Friday. I'm still expecting a pullback in gold, but after such a pullback, gold will be set up fabulously, with a flattened 200- and 50-day moving average.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
LIHR	16.21	20.00	+23.4%	18.42	Consider selling on a close < 18.77	Chart
FAF	28.07	28.82	+2.7%	27.19	N/A	Chart

Update 12/26/08, + Gold

Sold V for a loss today. Since two of our remaining three holdings are gold-related (one long and one short!), I thought I'd share my thoughts on gold action. On the 17th, gold pierced through resistance at the 200-day moving average, and as expected, proved unable to hold. It "should" now correct down to the flattening 50-day moving average, possibly even farther because of the open gaps at at GLD 77 and 75. (If not this leg down, a future leg down.)


However, gold can surprise. It doesn't do what it "should," and part of that is because it's a 24-hour market. It rose with some urgency today over the course of 5 hours, looking like it would get even higher, and then when the Hong Kong market opened it erased nearly all of its gains in 15 minutes, in a precipitous fall down. We currently have a semi-hedged stance, long a gold miner and short the metal itself, but not by design. It's just how the charts worked out.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
LIHR	16.21	18.88	+16.5%	17.10	Consider selling on a close < 18.60	Chart
FAF	28.07	28.92	+3.0%	27.19	Consider selling on a close < 27.79	Chart
DZZ	28.22	27.09	-4.0%	26.85	N/A	Chart

Update 12/24/08

Quick update on open positions. Sold TRN and GLBL for losses, bought DZZ. No new ideas until January 5th, as the focus is on closing positions by year end.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
LIHR	16.21	19.60	+20.9%	17.10	Consider selling on a close < 18.60	Chart
FAF	28.07	28.27	+0.7%	25.56	Consider selling on a close < 27.19	Chart
V	54.61	53.65	-1.8%	52.97	N/A	Chart
DZZ	28.22	27.77	-1.6%	26.85	N/A	Chart

Please refer to "How To Trade The Ideas" (right-hand side) to read this table.

Trade Ideas for 12/23/08

Markets continue to deteriorate. Increasingly it's looking like the market will not get higher, thus indicating that wave a off the lows is complete. Violating the December 12th low would seal that deal. However, things often happen on Tuesdays, so let's wait and see.

Sold today were CHS for a profit and VMW for a loss. No new positions. On a down day tomorrow we might lose the rest. If a couple holdings hit their sell-stops, consider selling the rest to cut losses/preserve profits. It's much easier playing the market when you're all/mostly in cash!

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
LIHR	16.21	18.82	+16.1%	17.10	Consider selling on a close < 18.52	Chart
TRN	15.21	14.71	-3.3%	14.28	N/A	Chart
GLBL	3.82	3.44	-9.9%	3.24	N/A	Chart
FAF	28.07	27.63	-1.6%	25.56	Consider selling on a close < 27.19	Chart
V	54.61	53.75	-1.6%	52.97	N/A	Chart

Gold looks like it'll correct for a little bit more, and the solars can still pop in this type of environment. Thus the ideas for tomorrow.

Trade Ideas for 12/23/08

Ticker	Entry	Exit A	Exit C	Chart
DZZ (UltraShort Gold ETN)	28.22	26.85	N/A	Chart
CSUN (China Sunergy)	4.21	3.72	N/A	Chart

Please refer to "How To Trade The Ideas" (right-hand side) to read this table.

Trade Ideas for 12/22/08

While we did end up with lower closes across the major averages, the price action was within Thursday's range. With the notable exceptions of the financial and basic materials sectors, the market held steady. The door remains open for further (limited) upside, even in the presence of considerable downside risk. So, mixed messages.

Coming up on a pair of holiday weeks, it's entirely conceivable that we'll get a moderately positive week or two on decreasing volume, in a repeat of Thanksgiving action. Recall, though, that the rug got pulled out from underneath the Monday following Thanksgiving, coinciding with the holiday's end. In this case, it's Monday, January 5th that the market is set to resume in earnest, as many participants are off until then. The upshot, by my read, is that to play the market now is to play for fun, to learn, but given the low reward-to-risk ratio, not a time to try for huge gains. Look to close out positions. If November 21 really was the low of Primary A, then we should see a sweet bear market rally unfold in the coming months. However, the markets need to pull back first, and the question now is whether or not the markets will get a little higher before that pullback begins. I myself will be taking next week off, so I expect to close out new and existing positions in fairly short order.

On Friday we sold NFLX, X, and JWN for losses. JWN exhibited some unusual action, leading to a decision by the NYSE to nullify trades. No new purchases.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
VMW	25.21	24.52	-2.7%	23.32	Consider selling on a close < 23.62	Chart
LIHR	16.21	19.35	+19.4%	17.10	Consider selling on a close < 18.56	Chart
TRN	15.21	15.47	+1.7%	14.24	Consider selling on a close < 14.91	Chart
GLBL	3.82	3.30	-13.6%	3.24	N/A	Chart
CHS	3.72	4.38	+17.7%	3.94	N/A	Chart
FAF	28.07	27.92	-0.5%	25.56	Consider selling on a close < 27.12	Chart
V	54.61	54.97	+0.7%	52.73	Consider selling on a close < 53.78	Chart

Like I said, prospects are dim, but you never know. On the first day of Thanksgiving week, a surge in bullish sentiment led to a strong Monday close, and the same thing could happen tomorrow. Here are a couple of charts that would benefit in such a case.

Trade Ideas for 12/22/08

Ticker	Entry	Exit A	Exit C	Chart
PFG (Principal Financial Group)	21.31	18.24		Chart
CSUN (China Sunergy)	4.21	3.74	N/A	Chart

Please refer to "How To Trade The Ideas" (right-hand side) to read this table.

Trade Ideas for 12/19/08

As much as I thought today's action would provide some answers, it really didn't. The market can still go either way. If sentiment is strong the next few sessions, we might break above that pesky level of resistance (Dow 9,000) that has held through numerous attempts. Or, that level of resistance might prove too strong, and an a-b-c correction will ensue, taking us down slowly in a zig-zag for the rest of the year, although not to new lows. I think the latter course of action is more likely, especially if we get a lower close tomorrow. We've had pretty bullish sentiment (well, by 2008 standards) and that still hasn't proven strong enough to break that 9,000 point barrier.

As for our holdings, I hope some of you took my advice to book profits in the first 15 minutes of trading, and possibly go short as well. Despite the fact that most of our holdings fell several percent, only one fell below its stop-loss price (CNX, for a loss of 1R), although a few are holding on by pennies. If you have a lot of positions and some of them fall below their sell-stops, something to consider doing is selling all your losing positions right then and there. Most of them will end up falling below their sell-stops anyway, so this is a way to further cut your losses. Unless we get a strong reversal tomorrow, it looks like more of these will go the way of CNX.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
VMW	25.21	24.28	-3.7%	23.32	N/A	Chart
JWN	13.06	13.42	+2.8%	12.69	Consider selling on a close < 13.16	Chart
LIHR	16.21	17.34	+7.0%	17.10	N/A	Chart
TRN	15.21	15.35	+0.9%	14.24	Consider selling on a close < 14.94	Chart
X	40.71	37.34	-8.3%	36.06	N/A	Chart
GLBL	3.82	3.34	-12.6%	3.24	N/A	Chart
CHS	3.72	4.06	+9.1%	3.76	Consider selling on a close < 3.85	Chart
FAF	28.07	27.73	-1.2%	25.56	Consider selling on a close < 26.53	Chart
NFLX	29.11	28.24	-3.0%	27.52	Consider selling on a close < 27.74	Chart
V	54.61	54.70	+0.2%	52.73	Consider selling on a close < 54.06	Chart

A couple of well set up charts for tomorrow, but the necessary catalyst is strong bullish sentiment. We've actually gotten that the past two Fridays, so who knows?

Trade Ideas for 12/19/08

Ticker	Entry	Exit A	Exit C	Chart
XIDE (Exide)	5.26	4.79	4.65	Chart
O (Realty Income Trust)	24.66	22.80	21.75	Chart

Please refer to "How To Trade The Ideas" (right-hand side) to read this table.

Trade Ideas for 12/18/08

The market's preparing for a big day, and that day is Thursday. Tomorrow we shall see at least one of the following: (1) a breakout. (2) a fake-out. The market is between medium-term resistance above and short-term support below, and it spent the day coiling in between the two areas.

With 11 positions, we are set in the event of a breakout. In the event of a fake-out, sell your positions at the stops. In fact, for a few of our positions, I recommend getting out within the first 15 minutes of trading as they have hit short term resistance, or, in the case of LIHR, look like they may have hit the peak of an a-b-c countertrend move. In the event of a fake-out, consider doing a stop-and-reverse on your positions. Sell double the number of shares you own, effectively closing your long and opening a short, risking to today's high. Only do this after 10:15 A.M.; if the position falls below the sell-stop prior to that time, just close it.

We bought the full roster of yesterday's ideas. When the market is roaring, it's natural for the system to rack up a lot of positions. If the market truly is strong, and strong price action lies ahead, then feel free to sell positions and add new ones on further strength. Just be aware that in this bear market, there has been a tendency for the market to fall apart right when it looks like it's gathering steam. But maybe this time will be different; we shall see.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
JWN	13.06	13.98	+7.1%	12.69	Consider selling within the first 15 minutes of trading	Chart
LIHR	16.21	19.23	+18.6%	17.10	Consider selling within the first 15 minutes of trading	Chart
TRN	15.21	15.85	+4.2%	14.24	Consider selling within the first 15 minutes of trading	Chart
X	40.71	42.12	+3.5%	36.06	Consider selling on a close < 38.74	Chart
GLBL	3.82	3.62	-5.2%	3.24	N/A	Chart
CHS	3.72	3.85	+3.5%	3.41	Consider selling on a close < 3.59	Chart
FAF	28.07	28.16	+0.3%	25.56	Consider selling on a close < 26.53	Chart
NFLX	29.11	28.79	-1.1%	27.52	Consider selling on a close < 28.78	Chart
V	54.61	55.36	+1.4%	52.73	Consider selling on a close < 54.05	Chart
VMW	25.21	24.46	-3.0%	23.32	N/A	Chart
CNX	32.64	32.37	-0.8%	28.99	Consider selling on a close < 30.54	Chart

I don't recommend carrying more than 12 full positions (however you want to define a full position). We're at 11 now, so I won't be recommending as many ideas until that number starts falling. Most crucially, do not elect either of tomorrow's ideas until 10:15 AM.

Trade Ideas for 12/18/08

Ticker	Entry	Exit A	Exit C	Chart
XRX (Xerox)	8.07	7.49	N/A	Chart
GRMN (Garmin)	20.73	18.99	N/A	Chart

Please refer to "How To Trade The Ideas" (right-hand side) to read this table.

Trade Ideas for 12/17/08

Nice rally today, and the way looks clear for a small run. However, I'm wary of Fed-induced moves. Sometimes a day or two after Fed euphoria (or, more often, dysphoria), reality sinks in, and the market breaks in the other direction. So I recommend tight stops and keeping your finger on the sell button.

We sold MELI today; just a couple days ago I suggested adding to MELI on weakness, and it turned out to be the only stock of the bunch that didn't rise today. I can spot the pattern, but so often the best-looking ideas don't go anywhere, and seemingly middle-of-the-pack one end up big winners. As for additions, we nearly bought all of yesterday's ideas. The exception was LNG. The official records will show that the high of the day exceeded our buy entry price. However, I was watching this stock. It traded at a maximum price of 3.40 all day. At 1pm, after the market had closed, it traded at 3.70, and that became the official closing price. Yet, I'd call that a bad print. The weird thing is, the same thing happened in LNG two days ago, when it "closed" at 3.45 even though it spent the day trading in a much lower range. Anyway, now we have too many holdings.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
JWN	13.06	13.13	+0.5%	11.86	N/A	Chart
LIHR	16.21	19.29	+19.0%	17.10	N/A	Chart
X	40.71	40.25	-1.1%	36.66	N/A	Chart
GLBL	3.82	3.68	+3.7%	3.24	N/A	Chart
CHS	3.72	3.77	+1.3%	3.19	Consider selling on a close < 3.41	Chart
FAF	28.07	27.99	-0.3%	25.56	N/A	Chart
NFLX	29.11	28.65	-1.6%	27.22	N/A	Chart
V	54.61	54.77	+2.9%	51.76	Consider selling on a close < 52.64	Chart

We have more than enough positions, but if you missed out on some of the trades, here are a few that look OK for tomorrow.

Trade Ideas for 12/17/08

Ticker	Entry	Exit A	Exit C	Chart
VMW (VMWare)	25.21	23.59	22.99	Chart
TRN (Trinity)	15.21	13.80	13.12	Chart
CNX (Consol Energy)	32.64	28.99	N/A	Chart

Please refer to "How To Trade The Ideas" (right-hand side) to read this table.

Trade Ideas for 12/16/08

The market ran higher early on, and within the first half hour we got stopped into all our positions for the day. And that's when the day-long pullback began.

It's always a tough choice whether or not to participate in the first 45 minutes of trading. Fake-outs are more likely to happen then, but every so often we get a day when the market starts out strong and keeps running. Actually, that hasn't happened in a long while. One thing I try to do is put a maximum number on the early signals. If the market does end up running, I'll put on the rest of the signals, with potentially higher entry prices.

Gold surged $15/oz in a span of 10 minutes around 10 this morning, and spent the rest of the session consolidating that advance. I don't think it'll get that much higher than $900/oz during this leg of its run; even more damning is the prevalence of rising wedge formations in the miners, which often presage quick, sharp corrections. So be careful with LIHR. Note that I've tightened the stop on it. For the other positions, let's hope we hit the jackpot with a rally, but if not, remain disciplined and get out at whatever sell-stop you have chosen.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
JWN	13.06	12.13	-7.1%	11.25	Consider selling on a close < 11.87	Chart
MELI	16.12	15.10	-6.3%	14.74	N/A	Chart
LIHR	16.21	17.94	+10.7%	16.59	Consider selling on a close < 17.24	Chart
X	40.71	37.17	-8.7%	34.79	N/A	Chart
GLBL	3.82	3.55	-7.1%	3.24	N/A	Chart
CHS	3.72	3.40	-8.6%	3.04	N/A	Chart

So we got the invitation, arrived on time, but no one's at the party. Doesn't mean it won't start, but I think at this point I'm pretty much set. I might take on a few more positions tomorrow, but I'm going to be limiting my risk per trade to a paltry 0.2% of equity. Before taking on new positions, ask yourself if you've taken on the right amount of risk for the opportunity. This upcoming rally (fingers crossed) won't be the big one, but it could help put a little extra oomph in your 2008 return. At the same time, if it doesn't materialize, you don't want to destroy the return you've worked hard to build up this year. Finally, the Fed reports its interest rate decision at 2:15pm, and typically markets go crazy right afterward.

Trade Ideas for 12/16/08

Ticker	Entry	Exit A	Exit C	Chart
FAF (First American)	28.07	25.56	N/A	Chart
NFLX (Netflix)	29.11	27.22	N/A	Chart
LNG (Cheniere Energy)	3.46	2.99	2.79	Chart
V (Visa)	54.61	51.76	50.49	Chart

Please refer to "How To Trade The Ideas" (right-hand side) to read this table.

Trade Ideas for 12/15/08

While the price action Friday wasn't the best we've seen lately, it gave me more encouragement than any day in the latter half of the year, if not all of 2008. To my eyes it was the most convincing piece of evidence that a turnaround in sentiment had taken place.

Thursday night the US Senate failed to pass a bailout ("loan" they call it) to the auto industry, and futures plunged, looking early on like we'd get limit down and perhaps open 300-400 points lower on the Dow. But contrary to what most people think, especially Senator Harry Reid who quipped Thursday night that he "dreaded" to see the Wall Street reaction the next day (maybe he was short?), the market direction does not depend on the news. News will move the market, but the #1 determinant as to the direction of the move is market sentiment. It's one of the hardest factors to grasp, but insight into human emotional behavior will get you a long way there.

The market is the composite of all its participants, and to personify it as a single entity you'd have to say it's an overly sensitive being with rapid-cycling manic depression, twitchy, mean, narcissistic, as capable of pumping itself up to the point of maximal hubris as falling into a vicious cycle of depression and crying jags that never seem to end. But underneath it all, undeniably human. And the human behavior I witnessed Friday was a kind of numbness. The market no longer cared about bad news; it had heard so much of it lately that it had become numb, just as an ordinary person will reach a point of indifference to pain should a cascade of terrible circumstances fall upon him.

We had early selling, but that was the weak hands (like us) getting out, the ones who had only just gotten in. (The older weak hands were either long gone or had abandoned ship during the October or November lows). The only other holders left were the strongest of the strong hands, who were waiting until zero to part with their shares, and then the most evolved set of market participant, the ones who intuited that the market had had enough and would shrug off the news. Actually, this group most likely started out flat and were the ones responsible for the early buying. When the selling momentum in stock futures stopped around midnight Thursday, that was their cue to jump in. One of the ironic aspects of the bottoming process is that it takes a provocation by the bears to elicit a bullish response, and part of that is due to the fact that the early bulls want to gauge the strength of the bears before they jump in.

As for our holdings, FLR gapped down and we sold for greater than 1R loss. The looser stop in JWN allowed us to hold on; if you followed my guidelines to a T, you'd be out as well but by the official sell-stop, we're still in it. Our other 2 holdings did well after early hiccoughs.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
JWN	13.06	12.66	-3.1%	11.25	Consider selling on a close < 11.99	Chart
MELI	16.12	17.17	+6.5%	14.74	N/A	Chart
LIHR	16.21	17.04	+5.1%	14.88	Consider selling on a close < 16.08	Chart

After Friday, I feel confident that we can rally for a bit, possibly as long as two weeks. This confidence translates to higher risk per trade and looser sell-stops, because a pullback now has a lower chance of being the start of a downward leg. We might even get a gap-and-run Monday, which I haven't seen in a long time. If instead we get a pullback, that's a potential buying opportunity. It's not part of this system, but on such a pullback, consider buying index calls or adding to the stake in MELI. Always minding your risk as anything can happen, but allowing a bit more to be risked given that circumstances appear to have changed for the better.

Trade Ideas for 12/15/08

Ticker	Entry	Exit A	Exit C	Chart
X (US Steel)	40.71	34.79	N/A	Chart
GLBL (Global Industries)	3.82	3.24	N/A	Chart
UDN (Ultrashort Dollar Fund)	26.18	25.62	N/A	Chart
BIDU (Baidu)	121.01	106.99	N/A	Chart
CHS (Chico's FAS)	3.72	3.04	N/A	Chart

Please refer to "How To Trade The Ideas" (right-hand side) to read this table.

Trade Ideas for 12/12/08

Today started out with a lot of promise, as new highs in this budding uptrend seemed within reach. The market rallied early on and seemed to be consolidating, getting ready for the next push upward. In reality, the buyers were slowly losing their nerve over the course of the day. In the afternoon, sensing this, the sellers took charge. The key point came at 1pm, as depicted on this 2-day chart of the SPY:


The shame is that the bulls had a real shot at this. It remains to be seen whether today's action was a setback or something worse.

Now, we as small players have no control over the market, but we always have control over how we respond to the market. And even though I wished it didn't have to be this way, especially after hitting a new all-time high intraday, I started selling my laggards for losses in the afternoon. Some of them hit their sell-stops, but in addition I pre-emptively sold several holdings just to limit my risk. This was a precautionary measure, in response to the market behaving in a way that was not in line with my theory of a new uptrend high. Should we reverse abruptly and get a strong day tomorrow, I just hope the market will let me in by not gapping up above the highs attained so far this week. Speaking of gaps, one encouraging development was the closure of an island gap:


Small comfort, but one nonetheless. As for our holdings, we sold our big winners AN and DAL, managing to hold onto most of the gains in their respective runs (+36.4% and +18.1%) thanks to yesterday's tight stops. We also sold ORI and PNK for losses and bought some issues that got taken down this afternoon: FLR and LIHR.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
JWN	13.06	12.62	-3.4%	11.25	Increase sell-stop to 12.34 in the afternoon. Whether it goes up or down from here, it looks like it could pull back in the morning, so give it a little room.	Chart
MELI	16.12	15.55	-3.5%	13.88	Consider selling on a close < 15.20	Chart
FLR	53.26	50.69	-4.8%	49.42	None	Chart
LIHR	16.21	15.68	-3.3%	14.88	Consider selling on a close < 15.59	Chart

Unlike yesterday, I do discourage taking on more risk than usual with tomorrow's ideas. A more defensive posture is warranted as today's action could be more than just a hitch. We'll find out soon enough.

Trade Ideas for 12/12/08

Ticker	Entry	Exit A	Exit C	Chart
LNG (Cheniere Energy)	3.51	2.99	2.89	Chart
CHS (Chico's FAS)	3.81	3.23	2.99	Chart
XRX (Xerox)	8.01	7.33	7.25	Chart

Please refer to "How To Trade The Ideas" (right-hand side) to read this table.

Trade Ideas for 12/11/08

Today was a big day for commodities. Coal miners and gold miners and the oil patch all did phenomenally well. The rest of the market continued consolidating, which I interpret as a bullish sign. I think of the consolidation period as a kind of coiling, so that when the next move does take place, its magnitude will be fueled by the length of the base. Of course, my read is that the next move will be upward, but if that turns out to be incorrect, the rule of thumb about the move's magnitude still applies.

We bought MELI and PNK today. PNK triggered early on, and very briefly, so I'm not sure anyone actually purchased it. Just in case, I'm including it in the table. If you didn't buy and want to, buy tomorrow at 6.83 or higher, risking to 6.19. I'm using tight sell-stops for all of the holdings that we bought prior to today. My feeling is, it's up or out for these positions, given that there's a sizable move coming. I also provide looser stops in the Guideline column, in case you'd rather allow them some more wiggle room.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
AN	7.01	10.27	+46.5%	9.56	Looser sell-stop: 8.46	Chart
DAL	8.88	11.00	+23.9%	10.49	Looser sell-stop: 9.89	Chart
ORI	10.01	9.78	-2.3%	9.37	Looser sell-stop: 8.98	Chart
JWN	13.06	12.99	-0.6%	12.34	Looser sell-stop: 11.25	Chart
MELI	16.12	15.69	-2.7%	13.88	N/A	Chart
PNK	6.81	6.62	-2.8%	6.19	N/A	Chart

Just as yesterday, I wouldn't discourage taking on more risk with tomorrow's trade ideas.

Trade Ideas for 12/11/08

Ticker	Entry	Exit A	Exit C	Chart
PAG (Penske Auto Group)	8.06	7.33	6.94	Chart
FLR (Fluor)	53.26	49.42	N/A	Chart
LIHR (Lihir Gold)	16.21	14.88	14.46	Chart
ANSS (Ansys)	30.72	28.93	30.72	Chart
SFI (iStar Financial)	1.96	1.65	1.49	Chart

Please refer to "How To Trade The Ideas" (right-hand side) to read this table.

Trade Ideas for 12/10/08

A very nice pullback day today, orderly (no gaps) and just enough to look like a completed consolidation for a run up. In a bull market, you'd jump in with both feet on every one of these types of setups. The odds were just so much in your favor. But we're in a bear market now, so even though the setup looks delightful, circumstances have shown that it pays to be cautious. Even should the entry turn out successful, caution is warranted on the exit. For example, think about booking some profit at the end of strong days, and in the mornings if there's a gap up. Nevertheless, by my read the market is prepped to go higher, and there should be a couple days left in the tank, even after a breakout, before the imminent b-wave pullback (q.v. yesterday's post).

VMC was sold today for a 7+% profit as the pullback took it below the bottom of yesterday's gap. Otherwise, no new transactions.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
AN	7.01	9.68	+38.1%	8.46	Consider selling on a close < 9.56	Chart
DAL	8.88	10.87	+22.4%	9.89	Consider selling on a close < 10.52	Chart
ORI	10.01	9.41	-6.0%	8.98	N/A	Chart
JWN	13.06	12.50	-4.3%	11.25	Consider selling on a close < 12.35	Chart

It was originally my intention to give at most one trade idea per day, and slowly that number has been inching up... to 5 ideas for tomorrow. Hey, charts look constructive, and if you're the type that likes to throw caution to the wind and just rack up a bunch of positions in one day, there have been much worse times to do so. Many of my recent suggestions are also on my own personal list: F, ASTE, OMCL, SIRF, NRG, LNG, HMY, CEF, SSO... too many to list and I don't want to have to keep track of them in case they do get elected, so consider them honorable mentions. The "official" signals are:

Trade Ideas for 12/10/08

Ticker	Entry	Exit A	Exit C	Chart
MELI (Mercadolibre)	16.12	13.88	N/A	Chart
PNK (Pinnacle)	6.81	6.19	N/A	Chart
TNE (Tele Norte Leste)	15.41	14.38	N/A	Chart
WDR (Waddell & Reed)	13.63	12.49	N/A	Chart
MA (Mastercard)	151.51	142.27	N/A	Chart

Please refer to "How To Trade The Ideas" (right-hand side) to read this table.

Trade Ideas for 12/09/08

The market gapped up at the open and pretty much stayed put for the rest of the day. The 50-day moving average was resistance for today's advance, and the market has already begun consolidating. There may be some rangebound trading ahead, or a pullback, but Friday's lows look good. The rally we've all been awaiting is now underway (hurray!), giving long-term holders an opportunity to recoup a portion of their losses, and us traders one final chance to post a respectable return for 2008 (i.e., something greater than +15%).

Our long holdings did very well today, but if you didn't sell SMN Friday, you were in for a world of hurt at the open. It really illustrates the difference between trading short in a bear market and trading long in a bull: when the shorts make a parabolic 5th wave peak, they fall away with savage velocity, whereas a regular equity hitting its price peak will oftentimes roll gently.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
AN	7.01	10.16	+44.9%	8.46	Consider selling on a close < 9.76	Chart
VMC	64.01	74.00	+15.6%	69.47	N/A	Chart
DAL	8.88	11.02	+24.1%	9.89	N/A	Chart
ORI	10.01	9.93	-0.8%	8.98	N/A	Chart
JWN	13.06	13.29	+1.8%	11.25	N/A	Chart

The vast majority of charts look extended, but they may continue extending until the top of this short move. "This short move" is the first of a three-part B wave (i.e., wave a of countertrend a-b-c) that will eventually take us to the highs of 2009, concluding Primary B. The first wave is always the hardest to play; the smart play is actually to get out early because it doesn't last very long, and to wait for countertrend c to begin (as early as next week). Alternatively, you could hold through the countertrend b wave down; it should be quick and not too painful, but you'd need wider stops than what I provide. The most important thing to remember from now till the end of Primary B next year is not to be blinded by the rally, because ultimately it's a trap. You must be on guard. In that spirit, tomorrow's trade ideas, all of which tend toward the low-volume side.

Trade Ideas for 12/09/08

Ticker	Entry	Exit A	Exit C	Chart
OMCL (Omnicell)	12.12	11.41	10.81	Chart
ELP (COPEL)	11.46	10.85	10.19	Chart
ASTI (Ascent Solar)	4.51	4.20	3.95	Chart

Please refer to "How To Trade The Ideas" (right-hand side) to read this table.

Trade Ideas for 12/08/08

Friday's action was encouraging. The jobs number came in over 50% worse v/v already very negative expectations. While the market sank, weighted down by this dose of bad news, it didn't break down. December's lows were tested, but not November's. Maybe, just maybe, the market has priced in some of the more pessimistic eventualities. If it has, then it can conceivably start to chug higher, climbing a wall of worry, provided news doesn't get appreciably worse in degree. Who knows, we might even get a rally this week. Here's a look at the chart of the SPY:


Friday was kind of an outside reversal day, and with any luck we're set to move in the next couple weeks above the Thanksgiving high. To see some higher highs and higher lows would be great, but if we get a huge surge early on, I'd look to take profits. Ideally, it'll be a slow building.

Primary B, the big rally that I'm hoping for, is actually rather modest in the grand scheme of things. New highs are out of the question, and what's to unfold won't even be close to a double top. Something like a 20-40% increase from today's prices; an SPY target of, say, 110-120. With reference to the crash of 1929, here's where I think we might be:


Not a long rally, nor a spiky one, really just a kickback type of rally writ medium-large. But it should give us prices we haven't seen since early fall, and that we maybe won't see for the rest of our lives.

As for our holdings, the short side bets didn't work out. SH was entered and exited; SMN fared better, giving us a thrill as it soared above 100 before collapsing. SMN went parabolic on the heels of the jobs news; the fact that SH didn't was a divergence worth noting. One thing it tells me is that, for the time being, retail, financial and consumer have more strength than basic materials. We're still officially in SMN, and anything can happen, but it doesn't look good for the shorts. Our other holdings did well.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
AN	7.01	9.51	+35.8%	8.46	Consider selling on a breach of Friday's lows	Chart
VMC	64.01	66.75	+4.3%	63.25	Consider adding above 67.21, risking to 63.25	Chart
DAL	8.88	10.36	+16.7%	8.61	N/A	Chart
SMN	93.81	84.90	-9.5%	83.99	N/A	Chart

For Monday, a couple more old-line economy ideas to add to our collection, as well as a tech stock with a promising chart.

Trade Ideas for 12/08/08

Ticker	Entry	Exit A	Exit C	Chart
ORI (Old Republic)	10.01	8.98	N/A	Chart
JWN (Nordstrom)	13.06	11.25	N/A	Chart
ARRS (Arris Group)	7.31	6.44	6.24	Chart

Please refer to "How To Trade The Ideas" (right-hand side) to read this table.

Trade Ideas for 12/05/08

Far from clearing things up, today's action only served to make the picture more ambiguous. The market was humming along pretty well until the last hour when it fell apart. On the intraday chart it was quite a collapse, but in the context of the daily, the trading range established since Monday remained intact. Among yesterday's cup-and-handle breakouts that corrected today, none fell below the level of their handles.

One likely reason the market has yet to pick a side is tomorrow's jobs report. The data itself will be important, but the big question is whether the market will rally despite the bad news (because bad news is pretty much a given). If it can, there's a sense that the market can start to climb "the wall of worry." If it can't, a retest of the lows may be next.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
AN	7.01	9.30	+32.7%	8.46	Consider selling on a close < 8.93	Chart
VMC	64.01	64.22	+0.3%	58.68	Consider selling on a close < 62.87	Chart
DAL	8.87	8.88	+0.1%	7.99	Consider selling on a close < 8.45	Chart
SMN	93.81	91.22	-2.8%	83.99	Consider selling on a close < 86.50	Chart

I'd wait before taking any new positions tomorrow. A volatile morning awaits.

Trade Ideas for 12/05/08

Ticker	Entry	Exit A	Exit C	Chart
ASTE (Astec)	31.36	29.16	N/A	Chart
LDK (LDK Solar)	15.01	13.29	12.49	Chart
SH (Short S&P 500)	92.47	87.19	N/A	Chart

Please refer to "How To Trade The Ideas" (right-hand side) to read this table.

Trade Ideas for 12/04/08

Since Monday's huge drop, we've had a couple days of upward drift into Thursday. Although the major indices were range-bound, quite a few charts broke to the upside today. For the most part, these were breakouts from cup-and-handle setups. Perhaps these breakouts are a preview of what's to come tomorrow, and we'll finally get a definitive statement as to which direction the market wishes to take.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
AN	7.01	9.25	+31.9%	8.46	None	Chart
VMC	64.01	63.59	-0.7%	58.68	Consider selling on a close < 61	Chart

Tomorrow has the potential to be a strong up day. Emphasis on potential. I plan to ratchet up my risk per trade on the long ideas because I like the risk-reward picture. One short idea thrown in, just in case.

Trade Ideas for 12/04/08

Ticker	Entry	Exit A	Exit C	Chart
F (Ford)	3.02	2.57	2.67	Chart
DAL (Delta Air)	8.87	7.79	7.99	Chart
KGC (Kinross Gold)	14.96	13.49	N/A	Chart
SMN (Ultrashort Basic Materials)	93.81	81.86	84.29	Chart

Please refer to "How To Trade The Ideas" (right-hand side) to read this table.

Trade Ideas for 12/03/08

We lost a couple of our positions in today's range-bound trading. For the bulls the trading range is a good sign, as the market needs time to digest Monday's losses before it can put together a bona fide rally. For the bears this is a good sign as it provides a low-risk entry to the short side.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
AN	7.01	9.17	+30.8%	7.97	Consider selling on a close < 8.62	Chart

Playing both sides; since we're in a downtrend, the more likely path is down.

Trade Ideas for 12/03/08

Ticker	Entry	Exit A	Exit C	Chart
VMC (Vulcan Materials)	64.01	55.68		Chart
QID (Ultrashort QQQQ)	85.57	78.99	N/A	Chart
DUG (Ultrashort Oil & Gas)	36.61	33.63	N/A	Chart

Please refer to "How To Trade The Ideas" (right-hand side) to read this table.

Trade Idea for 12/02/2008

Sellers took control early and haven't yet let go. While the markets were due for a pullback, the magnitude of today's selling jeopardizes the bullish read. It would've been a lot better had last Tuesday's lows held; now new lows may be next. Most of our positions were sold, a couple for some nice gains, although the gap down in gold didn't help our return in GLD. I only hope my suggestion to take profits Friday didn't fall on deaf ears.

It's too early to tell what type of move is going to play out. We could get a fast recovery tomorrow, or a drift downward into Thursday, or a resumption of the furious pace of selling down to the old lows or even beyond. For now, I'm adopting a neutral position: play out the holdings we still own, and avoid taking new ones.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
LNG	2.94	2.76	-6.1%	2.64	None	Chart
AN	7.01	8.55	+22.0%	7.97	None	Chart
AMZN	43.46	40.47	-6.9%	39.59	None	Chart

AN has bucked the downward trend and may even be establishing a base on its 50-day moving average. Wait until after the first 45 minutes of trading if you wish to add.

Trade Idea for 12/02/08

Ticker	Entry	Exit A	Exit C	Chart
AN (AutoNation)	8.68	7.97	N/A	Chart

Please refer to "How To Trade The Ideas" (right-hand side) to read this table.

Trade Ideas for 12/01/08

Not a whole lot of action Friday as the market took a little breather in the half day it had, and I'm not sure we can read much into it. Monday will be an important day, as it sets the tone after a week that could easily be dismissed as a holiday week. By my read, the charts look very encouraging, and even more encouraging is the sudden lack of pundits saying that we have hit a bottom. Just a weird thing about the stock market; if a majority of people think something will happen, it probably won't. A lot of people have felt so burned lately that they have gotten pre-emptively short, expecting the next big drop.

Although I'll be surprised if we don't get a pullback sometime Monday, simply because we've had so many up days in a row, I am short-term bullish on the market. I've been waiting for the sucker's "rally" to begin, one that lasts on the order of weeks rather than hours, and I think we might be in it already. The steepness of the climb since two Thursdays ago shows bullish determination. Then again, the bears have showed so much strength in the past two months that it's unwise to count them out.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
GLD	74.27	80.31	+8.1%	79.27	Look to add on a break above 81.73	Chart
LNG	2.94	3.14	+6.8%	2.64	Consider selling on a close < 2.79	Chart
AN	7.01	8.54	+21.8%	7.95	None	Chart
ACM	21.84	26.49	+21.3%	25.63	Consider selling on a close < 25.83	Chart
UGP	22.62	22.04	-2.6%	21.24	Consider selling on a close < 21.59	Chart
DBA	24.86	24.68	-0.7%	23.99	Consider selling on a close < 24.43	Chart
AMZN	43.46	42.70	-1.7%	39.59	Consider selling on a close < 42.22	Chart
EWT	7.63	7.78	+1.9%	7.31	Consider selling on a close < 7.64	Chart

Many charts, more than ever, are set up the way I like for Monday. A big part of this is due to Friday's low-volume consolidations, so I take it with a grain of salt. A couple of our current holdings look good for re-adds.

Trade Ideas for 12/01/08

Ticker	Entry	Exit A	Exit C	Chart
GLD (SPDR Gold ETF)	81.73	79.27	N/A	Chart
LNG (Cheniere Energy)	3.19	2.79	2.64	Chart
HMY (Harmony Gold)	8.78	8.29	7.99	Chart
PCL (Plum Creek Timber)	37.53	35.58	33.75	Chart

Please refer to "How To Trade The Ideas" (right-hand side) to read this table.

Trade Ideas for 11/28/08

We had a broad rally Wednesday: most, if not all, sectors rose, and some rose quite a bit (solars). We bought three new positions. The market has strung together a series of winning days for the first time in a very long time. I'm now inclined to believe that we'll see higher highs before we see a lower low (specifically last Thursday's panic low). That said, in order to recharge its momentum, the market needs to pull back.

The pullback might not happen Friday simply because of the holiday effect. So Friday might be a good time to do some profit taking; you can always re-enter the sold positions after the pullback is over on potentially lower entry prices (but, potentially higher as well). It's worth noting that the double inverse ETFs have pulled back to circa their 50-day moving averages, which provided support during the early November bull trap. The time is right for the bears to reassert themselves soon. I have to emphasize that I don't think they'll get very far, so the most I'd do is get flat; I would not go short because of what I perceive to be limited profit potential. The short side is a tired-looking chart; the last impulse took a long time to make a slightly higher high; this is a common look for 5th-wave moves that mark the end of an impulsive phase.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
GLD	74.27	80.38	+8.2%	79.27	None	Chart
LNG	2.94	3.12	+6.1%	2.63	Consider selling on a close < 2.86	Chart
AN	7.01	8.20	+17.0%	7.36	Consider selling on a close < 7.56	Chart
ACM	21.84	26.78	+22.6%	23.37	Consider selling on a close < 25.63	Chart
UGP	22.62	23.85	+5.4%	21.24	None	Chart
DBA	24.86	24.80	-0.2%	23.99	Consider selling on a close < 24.45	Chart
AMZN	43.46	43.96	+1.2%	39.59	Consider selling on a close < 40.28	Chart
EWT	7.63	7.71	+1.0%	7.25	Consider selling on a close < 7.50	Chart

The other possibility is that the pullback has already happened. Tomorrow's ideas have charts that speak to this possibility. GLD looks good for a re-entry. For more risk, look to DGP (double gold, but not even indirect ownership of physical gold) or SLV (silver). Silver tends to outperform gold when gold is rising. Alternatively, use CEF, which is a fund offering indirect ownership of a mix of gold and silver bullion. To keep record-keeping simple, of these permutations I'm only going to recommend GLD. I'd wait until after the first 45 minutes to enter any new positions.

Trade Ideas for 11/28/08

Ticker	Entry	Exit A	Exit C	Chart
GLD (StreetTracks Gold)	81.41	79.27	N/A	Chart
IBM	82.41	78.59	78.21	Chart
CATY (Cathay Bancorp)	21.01	19.29	18.41	Chart

Please refer to "How To Trade The Ideas" (right-hand side) to read this table.

Trade Ideas for 11/26/08

Today we got across-the-board pullbacks, the ones that were bound to happen sooner than later. What's encouraging is that the pullbacks were shallow, but also that stocks finished closer to their highs than their lows. Particularly in the commodities stocks. Since my read of the commodities is that they remain in a structural long-term bull market, I'm watchful of the point at which their path will diverge from that of the general market (which began a structural bear over a year ago).

That's well and good, but the big question is whether the pullback is over. I don't know; volume is on the light side, but there's still a good chance of a Thanksgiving rally. Fortunately my system is designed to rack up positions quickly when the setup is right, and right now the setup is right. If the market continues its upward path, we get stopped in to new positions as prices rise, and take part in the rally. If the pullback should continue, we either don't get stopped in (because prices don't make their way higher), or we get stopped in and quickly out on a whipsaw. What we don't do is attempt to anticipate a move higher prior to the actual breakout, nor do we buy a position and hold onto it even as it falls to new lows.

AN and ACM hit their major moving averages, and while both subsequently fell back, the latter managed to climb back up and is looking good. I realize I mis-blogged yesterday as AN was nearing its 50-day moving average, not 200- (as was the case for ACM). For my part, I dumped both of these positions just below their moving averages. We bought UGP at the end of the day.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
GLD	74.27	80.87	+8.8%	79.27	Consider making the sell-stop a close-below price if you want a looser leash	Chart
LNG	2.94	2.70	-8.2%	2.49	Consider selling on a close < 2.64	Chart
AN	7.01	7.75	+10.6%	6.33	Consider selling on a close < 7.37	Chart
ACM	21.84	26.77	+22.6%	23.37	N/A	Chart
UGP	22.62	22.16	-2.0%	18.45	Consider selling on a close < 20.99	Chart

Many, many charts have the setup that I'm looking for, so my challenge tonight is to narrow that list down to a manageable number that is in line with my risk tolerance. For you guys, I'll provide a representative sample.

Trade Ideas for 11/26/08

Ticker	Entry	Exit A	Exit C	Chart
EGO (El Dorado Gold)	5.72	4.99	3.87	Chart
DBA (PowerShares Agriculture ETF)	24.86	23.99	23.22	Chart
AMZN (Amazon.com)	43.46	39.59	N/A	Chart
EWT (iShares Taiwan)	7.63	6.89	7.25	Chart

I currently hold shares of EGO.

Please refer to "How To Trade The Ideas" (right-hand side) to read this table.

Trade Ideas for 11/25/08

Nice rally today, but I'm not buying it. Probably the most telling indication is that volume has been trailing off since Thursday's low. Granted, we are in a holiday-shortened week, but in all likelihood we'll get a pullback tomorrow. The real question is how the pullback's going to look. Under the bullish scenario, this incipient rally merely takes a breather before continuing upward. Under the bearish scenario(s), something else happens. Edge to the latter, unfortunately.

We bought all three signals from yesterday, and two of them look ready to be plucked as they near their 200-day moving averages. Check the Additional Exit Guideline column for more info.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
GLD	74.27	80.91	+8.9%	75.44	Consider taking some profit if you haven't already	Chart
AN	7.01	7.56	+7.8%	5.79	Consider booking profit as AN nears its 200dma ca. 8.30	Chart
ACM	21.84	24.65	+12.9%	21.24	Consider booking profit as ACM nears its 200dma ca. 26.50	Chart
LNG	2.94	3.00	+2.0%	2.49	N/A	Chart

After today's rally, not many charts look safe enough to enter. A pullback will help set us up for the next move.

Trade Ideas for 11/25/08

Ticker	Entry	Exit A	Exit C	Chart
UGP (Ultrapar Participacoes)	22.62	20.99	18.45	Chart

Please refer to "How To Trade The Ideas" (right-hand side) to read this table.

Trade Ideas for 11/24/08

The market rallied Friday afternoon after all, much to everyone's relief. It certainly took its time, though, and several sectors, such as the financials, even put in fresh lows before turning around. In my opinion, this doesn't bode well for the recovery. If, as many believe, there's a lot of pent-up demand for stocks, why didn't this demand manifest itself sooner?

One sector that bucked the trend was gold, which soared from the get-go. The biggest winners in the sector were the gold majors, i.e., the largest gold mining companies in the world, such as Gold Fields (GFI, +36%), Goldcorp (GG, +27%), and Barrick (ABX, +31%). In the hottest phase of a gold bull, the gold juniors lead the way, followed by the mid-tiers and majors, then silver and finally gold itself. Right now the order is almost in reverse, and gold has been in a near-term downtrend since the spring. There's no evidence that gold is not going to hit a lower low before it rises to a new all-time high. But rise it will—and sooner than later—for any of a number of reasons, the most important technical one being that gold is in a long-term structural bull market (along with the rest of the commodities), and this in contrast to all other sectors of the market that come to mind. Therefore, while gold may be held for the long term, sectors such as technology and retail must only be played for short-term bounces.

The question facing us now is, did we just begin one of these short-term bounces? The short answer is that we wait for the market to show us. The long answer is that one could argue for and against the likelihood that a bounce will come. On the con side, the market just hit a lower low, and the downtrend thus far has been textbook: lower highs and lower lows. Therefore, to think this time will be different is to be delusional. Furthermore, every rally attempt thus far has been short-lived despite promising initial momentum. On the pro-bounce side, we hit a lower low, and in a way, that means the other shoe has dropped. It can be interpreted as an all-clear signal. Shorts will be booking their profits as many were targeting the October 10th lows, taking away one source of supply. Psychologically, a double bottom flummoxes enough people that one could say the market has done its job of maximizing the pain. If a meaningful rally materializes, we could see gains of 30+% in the major averages.

Gold soared above the re-up price, so we stick with the original lot. This burst of momentum will surely dissipate soon, and gold did hit its 50-day moving average at Friday's close. Ideally gold does a shallow pullback for a couple days and then shoots up again. The near-term target is the 200-day moving average of ~$900/oz. Alternatively, gold could be rebuffed sharply by its 50. To hedge your bets, consider booking some profit.

Current Holdings
Ticker	Basis	Closing Price	Perf.	Sell-Stop	Additional Exit Guideline	Chart
GLD	74.27	78.85	+6.2%	75.44	Consider booking some profit now that gold has attained its 50dma.	Chart

Cheniere still looking good, and a couple others that are nicely positioned to take advantage in the event of a sustained market rally. No gold-related recommendations since we already have one in our current holdings, but if you're looking to add, I'd look at mid-tiers such as El Dorado Gold (EGO) or SLV, the silver ETF.

Trade Ideas for 11/24/08

Ticker	Entry	Exit A	Exit C	Chart
LNG (Cheniere Energy)	2.94	2.49	N/A	Chart
ACM (Aecom)	21.84	19.75	18.95	Chart
AN (AutoNation)	7.01	5.99	5.36	Chart

Please refer to "How To Trade The Ideas" (right-hand side) to read this table.