Saturday, June 23, 2012

Markets, Fed Juice!

Last Thursday about 3:00pm (not this Thursday, but the last one), the Fed started yapping about how it was going to ease this and ease that and the market started rallying.  It had a good day Friday, had a good day on Monday creating a Follow Through Day.  Had good days Monday, Tuesday, Wednesday, then Thursday it was brutal closing near the lows of the day.  On Friday, we closed near the highs of the day.  We got back about a half of what was lost Thursday.

As long as leading stocks didn't break down or break moving averages, those stocks are fine.  Keep in the mind, that in a bear market stocks tend to rally to their moving averages and then break down.  Friday the Dow was up 61 points, still trading below its 50dma, the S&P was down 30 Thursday, and up only 10 today.  Another thing to pay attention is is the Accumulation/Distribution rating.  The rating for both the S&P and the Nasdaq is a D+.  You don't want to go home and show your parents that!  Now it can improve.  

The XLF which tracks financials stopped at the 50 day yesterday and turned lower.  $JPM/$C both still below the 50 day moving average.  If the market will make a meaningful move higher, the semiconductors and financials can't be a drag.  They don't have to lead, but they can't be a drag.

For best investing results keep your strategy simple.  Simple means knowing what you are doing.  Jesse Livermore, had a simple strategy when it came to investing.  He was either in the trade because it was working or he was out because it wasn't working.  When he has to depend on "hope" in a trade, he gets out of it because it will only bother him in his trading and he cannot afford to be in anything but the 'live' ones.  There are many times when he was completely in cash, especially when he was unsure of the direction of the market.  His third point was, don't play the market ALL the time. It can't be done.  It's too tough on the emotions.  Don't try to play the game all the time.  Don't sit at the BlackJack table too long.  The market is smarter than you, smarter than us. (Those of you who follow my twitter stream, will know that I've made this point too many times!)  Casinos, the reason they are so big and so beautiful is because when you sit there long enough they happen to reach into your pocket and take your money. You may have a good hour, a good day, or a good week, but eventually odds favor you will lose.  If you push things in the market when the wind is not at your side or at your back you will lose.  This is why it is easy right now not to consider buying stocks such as $JPM and $C.  Look for something else.  Look for something that can benefit us.  It's a losers game to try to catch the falling knife.

As for the coming week, we should see some "window dressing" which occurs near the end of each quarter as mutual funds and other financial managers have to post their holdings.  This action tends to push the market upward.  They want to be seen holding stocks that look good to be holding.  

There was some shuffling on the Russell 3000 this weekend so some of the volume numbers are skewed. I kept track of volume of the indices on Friday and noticed throughout the day as the market headed upward, the volume percentage change kept going lower and lower, but then at the end of the day, the volume percentage numbers popped to the positive side.  Therefore, the volume numbers are suspect in my opinion, but it is what it is.

Stocks to note (pending market conditions)
ALXN had a reversal to the upside.  Really holding around support, around a pivot point
CRUS a niche company in the semiconductor industry.  They actually supply chips to the iPhone and iPad.  Acceralating bottom line growth numbers.
AMT just in a base, but huge bottom line growth and coming into play as it starts to trade more.
ALGN reversed and closed flat today. They make the invisible braces and other things too of course.
NSN (I know you cringe when you hear mortgage companies).  A new issue! It's had good volume on up days, lighter volume on down days, has tremendous growth.  They service mortgages and make sure everybody's ducks are in a row and take some of the middle money for their services.  On a personal note, I like this company. It reminds me of the MasterCard, Visa model.  A model where they get their money with little risk.
ULTA - not very exciting, but the stocks looks good.  Good volume up days, good sound growth, nice relative strength
VRTX - good top and bottom line growth, big volume days have been to the upside. 95 RS, ascending 50 dma.  Looks like it wants to emerge out of a long base
WWWW - great accumulation over the last 2 months.  Big volume on the up days. 67% earnings growth. It only trades 736,000 shares, but it is getting to a point where institutions can start taking note of the take.  It starts to become liquid enough for them to take a position in it.
SBH - Operate 4300 beauty supply stores.  Stock has nice sound base, broke out and pulled into support, above ascending moving averages.

For boring stocks (low beta stocks).  For those who prefer the slow lane to wealth!  
COST: 1.5 year base.  If it comes out, good things could happen.  They are growing.
TGT: It's been a base for a long time.  The longer time a stock is in a base, the further it can go when it comes out.

Before you buy a stock, you need to have a checklist.  Here's the checklist gentlemen and ladies!

  • Above the 50 day moving average
  • Good relative strength
  • Good top and good bottom growth
  • Good volume patterns
  • A sector that is in favor.
  • Look at the past several months.  See the big volume spike days.  Were they up days or were they down days.  If they were down days and the stock is in a base could indicate that the base will fail.  If they were up days, then it means the stock is getting accumulated.

 Speaking of the slow lane to wealth, when I graduated from college my father bought me a book that he insisted that I read.  The name of that book was "Get Rich Slow".  The book was packed full of great information. The author did make one point though...Would you rather get poor slow?

1 comment:

  1. Excellent points & insight on the market. Very good point of views. Some very good takeaways (note worthy). Thanks for sharing :)