September 3rd, 2010
While stock surfing today, I came across a perfect example of a stock in a downward trending channel. While many chartists are able to spot horizontally trending charts (and most stocks do trend in that fashion), they sometimes overlook stocks trending in upwards or downwards patterns.
As you can see by its chart below, Owens & Minor (OMI) stock began sliding in April. It formed a nearly perfect downward channel with a $2 separation between the relative peaks and valleys. The play on this is just like a regularly channeling stock: buy the dips and sell the peaks, and keep doing this until the stock breaks out of its channel. The good thing about channeling stocks is that your stop/loss values are pretty much set in stone (set them just outside of the channel).
And that, folks, is today’s chart lesson. Have a good holiday weekend!
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September 3rd, 2010
New Long Portfolio
I know I said that I was going to pack it in for the weekend, but I was expecting the jobs report to be more of a downer than it was. Wah! With the market up again, albeit on very low volume, I initiated a long portfolio with the ten entries selected from today’s *Blue Plate Specials* lists: Breaking out to new highs (1), Breaking out to new highs on lower volume (3), Low-priced leaders (3), Speculative leaders (1), and Darlings of the day (2).
Enjoy your weekend!
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September 2nd, 2010
Market notes
Another up day in the market forced us to close out all of our short positions. This whipsaw action is beginning to give Dr. Kris a headache. I’m keeping my fingers crossed that the jobs report tomorrow morning will settle the recent bull/bear standoff and push the market convincingly in one direction or the other, but my hopes will most likely be dashed and we’ll remain rangebound for a couple more weeks.
Sigh. Maybe I should just pack it all in and enjoy the rest of the summer along with my colleagues sipping a cold one under a beach umbrella. Got suntan lotion?
Blue Plate Specials portfolio update
All of our short positions were closed out for an overall loss. The fund is down 3.2% since 7/26 inception with 20 trading days.
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September 1st, 2010
Market Notes
Wow! I certainly did not see today’s rally coming—who would have thunk good news in the manufacturing sector had the ability to add such cheer to the market’s morning joe? The real problem with this market is that there’s nothing to weigh it down (read: volume) so that any tiny shift in the breeze is amplified out of proportion.
The bulls may be cheering today’s rally but the extremely low closing Trin (0.40) typically presages a decline so don’t be surprised if the market gaps down on the open (barring another unexpected economic surprise!). If you look at the charts of the major averages, you’ll see that they have been trading in a range for the past several months: the Dow Industrials has been bouncing between the 10,000 and 10,500 levels and the SPX between 1050 and 1125.
This channeling behavior is a direct result of the conflicting economic news—the economy is slowly recovering/the economy is headed for another downturn. We’re on this bull/bear teeter-totter and any piece of news (jobs, manufacturing, consumer sentiment, housing, etc.) that favors one side of the argument is going to temporarily move the market in that direction. If you don’t own a crystal ball, the best that you can do is to go into swing-trading mode if you’re just itching to make a trade, or sit on the sidelines and wait until one side is declared the victor.
No portfolio today
Because of the huge market rally, no new Blue Plate Specials portfolio was initiated today. If the market rallies again tomorrow, the short portfolios will be covered and if the SPX is trading above its 40dma, a long portfolio of ten stocks will be selected.
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August 31st, 2010
Market Notes
Some sort of unintended program trading routine must have kicked in 15 minutes before the market closed today because that’s when the major averages gapped up only to be followed several minutes later by a fall to previous rally levels. It looks like the junior traders aren’t up on the latest software revisions.
The good news is that volatility seems to be working its way out of the market. The bad news is that it’s not affecting the major averages—they’re still clinging to support levels. One ray of sunshine in the Bull sky is that the Dow transports are moving up compared to its sister (brother?) indices, and as we all know, the Transport index is considered to be a leading market indicator.
Today’s new portfolio
Another short portfolio was entered using stocks selected from today’s New Lows list featured on the *Blue Plate Specials*. The position size is adjusted according to currently total fund holdings which is down from inception. (Initial position size was $1000.)
A quick note: I did not cover ADY today as it hovered around the $8 mark until what must have been one second before the close where it closed at $8.15. I’m not sure if that’s a spurious trade but if it’s hanging out at that level tomorrow, I will definitely cover it.
[Construction rules for these portfolios are given in the 4/21/10 blog.]
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August 30th, 2010
Market Notes
The gains made on Friday were pretty much erased today as major averages cling to support. The VIX is back into bear territory but a relatively high Trin at the close could signal a bit of a relief rally on tomorrow’s open. Market action this week will be accompanied by very low volume. I’m expecting action to be muted until the all-important jobs report due out Friday. Although I do think a worse than expected number should be priced in, I don’t think it is and if my prediction comes true, then the indices will be blasting through current support. (A cheap straddle on the SPY or the Q’s might be a viable play.)
Today’s new portfolio
Another short portfolio was entered using stocks selected from today’s New Lows list featured on the *Blue Plate Specials*. The position size is adjusted according to currently total fund holdings which is down from inception. (Initial position size was $1000.)
A couple of quick notes on our other short portfolios…
One of the rules in setting up these portfolios is to not duplicate current holdings, but I guess I need a stronger eyeglasses prescription because STU appears in both the 8/25 and 8/26 portfolios. That’s my bad.
The ADY postion in the 8/25 portfolio is rallying which is great if you’re long but we’re not. I’ll cover the position tomorrow if it moves up any more.
But what we lost in that move has been more than made up for by DGIT, chosen from the Breaking Down list yesterday. It gapped down 38% today on lowered guidance and looks like it’s going to continue to fall.
[Construction rules for these portfolios are given in the 4/21/10 blog.]
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August 27th, 2010
Market Notes
Broad market rally prevents major averages from violating major support levels. VIX dropping below 25 is bullish but low end-of-day Trin (< 0.6) could spell a lower open on Monday. Of course, anything can happen over the weekend so who knows what traders may be thinking on Monday, if they even bother to show up at all?
Today’s new portfolio
Despite today’s rally, the SPX is still trading well below its 40 dma which is our long/short criterion. Therefore, a short portfolio was entered using stocks selected from today’s New Lows list and the Breaking Down list featured on the *Blue Plate Specials*. The position size is adjusted according to currently total fund holdings which is down from inception. (Initial position size was $1000.)
Today’s portfolio close-out
Because no portfolios were initiated during my early August hiatus, there is no portfolio to close out today. The next portfolio will be closed out on Sept. 8th.
[Construction rules for these portfolios are given in the 4/21/10 blog.]
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August 26th, 2010
Market Notes
The dog days of summer have certainly set in as the market drifts lower going into the close. The SPX and DTX both broke significant support levels at 1050 and 410 respectively. Although the Dow Industrials hit 9980, the index is now sitting right at 10,000 major support (half hour before the close). The market internals are on the bearish side and I don’t expect this level to hold.
Potentially market moving economic numbers to watch for tomorrow are consumer sentiment at 9:55 am ET and GDP (gross domestic product) after the market closes at 1:30 pm ET.
Today’s new portfolio
A short portfolio was entered using stocks selected from today’s New Lows list on the *Blue Plate Specials*. The position size is adjusted according to currently total fund holdings which is down from inception. (Initial position size was $1000.)
Today’s portfolio close-out
The short portfolio initiated on 8/11 was closed out today for a gain—yay!
[Construction rules for these portfolios are given in the 4/21/10 blog.]
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August 25th, 2010
Market Notes
After five down days, a mid-day rally wasn’t unexpected as traders take off some lucrative short positions. Although the VIX came down, it’s still in bear territory. A drop below 25 would alleviate that situation considerably.
One thing noticeably lacking from today’s session was income which has been the play as of late. Sure, there were new highs made in the muni bond space but many of those were made on lower that normal volume. The credit play may have just run its course, folks.
Today’s new portfolio
A short portfolio was entered using stocks selected from today’s New Lows list on the *Blue Plate Specials*. The position size is adjusted according to currently total fund holdings which is down from inception. (Initial position size was $1000.)
Today’s portfolio close-out
The long portfolio initiated on 8/10 was closed out today for another loss.
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August 24th, 2010
Market notes
Late summer malaise has definitely set in. The VIX is back over 25, the bull/bear dividing line. Judging by the opening gap, it sure looks like it’s going to continue upwards which is bad news for the bulls. Pundits are blaming worse than expected housing data, but honestly, with unemployment still high and showing little sign of abatement, banks reluctant to part with a plum nickel, and the end of the housing incentives, the only surprise is that today’s data actually caught people by surprise.
More potential market-moving economic reports are coming up so keep your seatbelts securely fastened. It’s sure to be a bumpy ride!
Today’s new portfolio
A short portfolio was entered using stocks selected from today’s New Lows list on the *Blue Plate Specials*.
Today’s portfolio close-out
The long portfolio initiated on 8/9 was closed out today for another loss. One thing this exercise shows is that even strong stocks will be losers during bear markets—another real-life example of why you can’t buck the trend!
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