Decision making with limited information Part1

Adopted from the Members Only site

One of the key challenge in trading a method like Episodic Pivots(EP) is, you have to base your decision on a very limited information. Plus you need to make that decision fast. Given 5 days, you can research every single thing about stock and make a decision. The problem is by that time the opportunity for low risk entry is gone.

Having access to lots of information is also not much of use unless you can form a judgment from it. If information access was everything,those with Bloomberg terminal would have minted money, but that is not the case.

Lets look at two recent stocks which were in IBD New America section last week.The articles explained the reason and factors behind the stocks recent earnings trend and future prospect.




Now both these stocks had Episodic Pivots in July/August time frames, much before these articles appeared , where they were good buys. But there was little information readily available to take the decision at that time for average investor. After reading the two articles on ANW and JRJC you know why it went up, but that information is not much of use now.

As an individual investor you are constrained by lack of resources and yet you must form a judgment based on limited information. That is the essential skill to build if you want to make lots of money in the long term. While it is difficult at first, more you do it, the better you get at it. Plus bulk of the data to make such decision is readily available on various free and paid sites. Translating the data to information and making decision is the difficult task.

The key to do this is to practice and look at all winners and see what made them winners.In second part we will look at what information helps in making the quick decision and how to develop judgment and sequential steps to follow to arrive at which EP candidate to pick and which to reject quickly. That is the key to trading the highly profitable Episodic Pivots strategy where if you get it right per trade profit can be very high, plus these stocks make these move in a very short time frames, as all of you have seen in recent weeks.

Next week on members site: Decision making with limited information Part2

Caution Time

• The Market Monitor is signaling a correction/pullback in next 1-5 days time frame.
• Broadening of the rally continues with over 223 stocks in breakout scan vastly outnumbering the down movers. Stocks up 25% or more has surpassed 1000 and is steadily improving since the green signal.
• If you are following any of the momentum based system or any of the methods mentioned here, your problem in last few weeks is not lack of opportunities but too many opportunities. With so many stocks going up 25% or more in such a short period of time, it has been extremely profitable few weeks.
• The Chinese party is cooling down, now that the grandmas in Timbuktu's have started noticing them. But fresh set of China stocks still offered good opportunities.
  
• Because the rally continues to broaden, there are still fresh set of breakout which are starting out their rallies and are in buy zones.
  
• If you have sound and well set methodology, you should be enjoying this market. Those who keep complaining frankly have no set method or their method are not aligned to market opportunities.
  

Fresh wave of buying

• When investors are in buying mood, negative news does not deter them. 2 days of mild pause was aggressively followed by fresh wave of buying.
• Market Monitor clearly indicates broadening of rally. Within a span of 2 weeks the stock up 25% or more in a month has zoomed from 80 to 215. Stock up 25% or more in a quarter have almost doubled.
• This has been one of the best trading periods in last couple of months. In last 7 days since Market Monitor turned green , stocks are just flying. So you know what to do next time when Market Monitor turns green. Buying breakouts post the signal has been extremely profitable for Episodic Pivot, IBD200, Double Trouble and Virgin strategy.
  

• One of the theme which has been highly profitable is China. There is abundance of stocks from China which have gone up 25% plus in few weeks in the stocks up 25% plus in few weeks. Almost all of them were signaled by the EP method. Now we are in late stage of this game . Many Chinese stocks are now reversing. Some are just one day wonder where they don't follow through.
• A period of red hot momentum is followed by digestion phase. Market Monitor is indicating we are entering such phase now. Such high momentum phases lead to reversal in small (next 1-5 days time frame). These are part of regular corrections in market.The primary trend is still up but minor corrections possibility high.
• For high momentum traders what it indicates need to protect open profit aggressively. New breakouts may not fly as easily as they were in early phase. Most important is protecting profit, momentum stocks correct more than market because they are high beta. It is no fun building your account up 25% plus in few weeks and then giving up bulk of that profit in few days. That is where Market Monitor helps.
  
  

Opinion on Stock and Following Methodology

Hey stockbee! I need your advice desperately. I bought cpsl yesterday right before close and this morning I got scared out on 2% loss, then after I sold it it went up to almost $11 dollars. How was supposed to know that it was going to continue going up instead of going down? If you could please give me a thorough analysis of your outlook on it..thanks so much

This is typical of the 30 to 40 emails I get daily on an ongoing basis. People want an opinion on stock. The questions start with what do you think of Gold stocks at this level, or what do you think of BIDU or do you think ISRG will run from here and so on.

Individual stock analysis in absence of methodology is a random guessing game. If you have a well thought out methodology, you just follow the stock that pass through that methodology. In any systemic approach or method like Episodic Pivots or IBD 200, or Double Trouble or other methods , the bulk of the thinking has been done beforehand. If the underlying logic behind the system is sound and tested, you don't have to think about individual stocks. Designing and making a method work is the real challenge in trading. If you have well thought out method and follow it regularly, profit is an outcome.

Later: Trading and window washing

Frenzied buying cools down

• Indices are forming what technical analyst call bull flag.
• A narrower set of stocks are leading the action as per Market Monitor.
• A pocket of momentum stocks are dominating the action. Large cap technology has been performing well. Medical technology stocks have recently started breaking out and possibly provide future leadership. While transport is in downtrend, shipping has been doing very well.
  
• The star sector so far is China. There is a frenzied buying in these names and now stocks even remotely connected to China are having 10% plus move in a day. Many of these stocks which have run up 100% plus in few weeks are now vulnerable and some already are reversing.
• For the rally to continue once this pocket of momentum slows down, what next. Which group will take on leadership is the question. New leadership has been emerging a bit slower and that is a concern area.
• Other concern area as per Market Monitor is for two days in row buying and selling pressure was matched.
• Quarter end dynamics should kick in soon and some of it is already visible with a rush to dump under performers and frenzied buying in some large cap tech names.
• There are trouble spots and signs of trouble but as of now bulls are in control and it has been extremely good time for trading . All the methods I trade have been producing some very big winners.
  

Profit taking hits the market

• The buying frenzy which started with rate cut cooled a bit yesterday. Short term players were actively booking profits in many high momentum names.
• The ratio of 131/100 breakout reflects that. While the indices have formed a consolidation area here, buying and slow broadening of rally continues.
  
• While this profit taking and reversal hit some stock, a fresh set of stocks like CROX, GRMN, CHNR, ICE, etc had fresh breakout. So there are more stocks joining the action. In a healthy rally such relay race continues with fresh stocks breaking out all the time.
• All this action has been happening against the drumbeat of negative commentary and obituaries to Goldilocks. But ultimately in the market, price action triumphs. May be the market has priced in subprime.
  

No shortage of buy candidates

In current conditions there is no shortage of fresh buy candidates everyday. Stocks are following through on the breakout and momentum is excellent. In such conditions breakouts are often followed by quick 10 to 20% move in few days.

Buy Signals
ALGN,Align Tech Inc (Google Yahoo Earnings Chart)
ARBA,Ariba Inc (Google Yahoo Earnings Chart)
CYNO,Cynosure Inc (Google Yahoo Earnings Chart)
CZZ,Cosan Limited Class A (Google Yahoo Earnings Chart)
DCP,DynCorp International Inc (Google Yahoo Earnings Chart)
DISCA,Discovery Holding Co Class A (Google Yahoo Earnings Chart)
DMND,Diamond Foods Inc (Google Yahoo Earnings Chart)
DSX,Diana Shipping Inc (Google Yahoo Earnings Chart)
FSLR,First Solar Inc (Google Yahoo Earnings Chart)
IHS,IHS Inc (Google Yahoo Earnings Chart)
INFN,Infinera Corporation (Google Yahoo Earnings Chart)
LXU,Lsb Industries Inc (Google Yahoo Earnings Chart)
MATK,Martek Biosciences Corp (Google Yahoo Earnings Chart)
NANX,Nanophase Technologies C (Google Yahoo Earnings Chart)
ORCL,Oracle Corporation (Google Yahoo Earnings Chart)
PRXI,Premier Exhibitions Inc (Google Yahoo Earnings Chart)
SDTH,Shengdatech Inc (Google Yahoo Earnings Chart)
SEA,Star Maritime Acquisition Corp (Google Yahoo Earnings Chart)
SIRT,Sirtris Pharmaceuticals Inc (Google Yahoo Earnings Chart)
ZVUE,Handheld Entertainment Inc (Google Yahoo Earnings Chart)

Bottom Sectors

MG317,Sporting Goods (Google  Yahoo  Earnings  Chart) 
MG328,Office Supplies (Google  Yahoo  Earnings  Chart) 
MG333,Recreational Vehicles (Google  Yahoo  Earnings  Chart) 
MG414,Regional-Southeast Banks (Google  Yahoo  Earnings  Chart) 
MG421,Investment Brokerage-National (Google  Yahoo  Earnings  Chart) 
MG425,Credit Services (Google  Yahoo  Earnings  Chart) 
MG434,Surety & Title Insurance (Google  Yahoo  Earnings  Chart) 
MG448,Mortgage Investment (Google  Yahoo  Earnings  Chart) 
MG525,Hospitals (Google  Yahoo  Earnings  Chart) 
MG528,Medical Practitionersi (Google  Yahoo  Earnings  Chart) 
MG631,Residential Construction (Google  Yahoo  Earnings  Chart) 
MG633,Lumber / Wood Production (Google  Yahoo  Earnings  Chart) 
MG634,Cement (Google  Yahoo  Earnings  Chart) 
MG721,Advertising Agencies (Google  Yahoo  Earnings  Chart) 
MG722,Marketing Services (Google  Yahoo  Earnings  Chart) 
MG729,Publishing-Books (Google  Yahoo  Earnings  Chart) 
MG731,Department Stores (Google  Yahoo  Earnings  Chart) 
MG737,Home Furnishing Stores (Google  Yahoo  Earnings  Chart) 
MG738,Auto Parts Stores (Google  Yahoo  Earnings  Chart) 
MG742,Toy & Hobby Stores (Google  Yahoo  Earnings  Chart) 
MG746,Specialty Retail - Other (Google  Yahoo  Earnings  Chart) 
MG752,Building Materials Wholesale (Google  Yahoo  Earnings  Chart) 
MG775,Trucking (Google  Yahoo  Earnings  Chart) 
MG843,Processing Systems & Products (Google  Yahoo  Earnings  Chart) 

Top Sectors

Technology and commodities are two clear themes in this top sector list.

MG113,Agricultural Chemicals (Google  Yahoo  Earnings  Chart) 
MG124,Oil & Gas Drilling & Explorat (Google  Yahoo  Earnings  Chart) 
MG125,Oil & Gas Equip & Services (Google  Yahoo  Earnings  Chart) 
MG130,-Metals & Mining- (Google  Yahoo  Earnings  Chart) 
MG131,Steel & Iron (Google  Yahoo  Earnings  Chart) 
MG132,Copper (Google  Yahoo  Earnings  Chart) 
MG133,Aluminum (Google  Yahoo  Earnings  Chart) 
MG134,Industrial Metals & Minerals (Google  Yahoo  Earnings  Chart) 
MG135,Gold (Google  Yahoo  Earnings  Chart) 
MG137,Nonmetallic Mineral Mining (Google  Yahoo  Earnings  Chart) 
MG342,Farm Products (Google  Yahoo  Earnings  Chart) 
MG517,Diagnostic Substances (Google  Yahoo  Earnings  Chart) 
MG627,Metal Fabrication (Google  Yahoo  Earnings  Chart) 
MG628,Industrial Electrical Equipmen (Google  Yahoo  Earnings  Chart) 
MG636,Heavy Construction (Google  Yahoo  Earnings  Chart) 
MG712,Resorts & Casinos (Google  Yahoo  Earnings  Chart) 
MG739,Catalog & Mail Order Houses (Google  Yahoo  Earnings  Chart) 
MG768,Technical Services (Google  Yahoo  Earnings  Chart) 
MG812,Personal Computers (Google  Yahoo  Earnings  Chart) 
MG815,Networking & Comm Dev (Google  Yahoo  Earnings  Chart) 
MG838,Scientific & Technical Instr (Google  Yahoo  Earnings  Chart) 
MG847,Diversified Communication Serv (Google  Yahoo  Earnings  Chart) 
MG851,Internet Service Providers (Google  Yahoo  Earnings  Chart) 
MG852,Internet Information Providers (Google  Yahoo  Earnings  Chart) 

How to improve IBD200

From the Members Only site

The central principle behind the IBD 200 strategy is equity selection. An in depth understanding of that helps you understand why it works and how to make it work better.

The IBD 200 is basically top 4% stocks ranked by Composite Rating. Or in other words they have 96 plus composite rating.

Now lets look at component of composite ratings. There are two component to it financial related and price related.

Financial related

Earnings
sales growth
pretax and after-tax profit margins
return on equity

Price Related

Relative Strength
Industry Rel Strength
Stocks price relative to its 5 week high (IBD takes those within 15%)
Accumulation Distribution

Now if you look at these factors closely highest weight is to Relative Strength. You will see even a 65 EPS rated stock in IBD 200 but if you look at Relative Strength ratings it will never be less than 90. Plus Industry Relative weight is again a derivative of Individual stocks relative strength.

So the most important attribute of the IBD 200 stocks which make them work is relative strength.

Now consider the other fact, the IBD 200 stocks are not necessarily the top 200 stocks in the market rated by IBD 200. In fact if you study the top 200 stocks by just Relative strength over a period of time IBD 200 members will be between 50 to 60% of that. So if you trade top 200 stocks just by relative strength and use same rules, you would still make money.

How does it matter to you as a trader whether a stock is going up because of financial factor or it is going up for any other reason. All you are interested in is capturing part of the move from a fast moving stock.

Now if you understand and internalize this logic, you will be able to trade IBD 200 based approach more profitably. In my second post I will talk about how to trade the top relative strength stocks and why I personally no more trade IBD 200. And how you can trade IBD200 without having Investor's Business Daily.

Negative Action

Below the surface select few stocks yesterday had high volume down days. In many cases some sectors like trucking and financials there continues to be selling pressure.

Select Stocks Down on High Volume
ACIW,Aci Worldwide Inc (Google  Yahoo  Earnings  Chart) 
ARGN,Amerigon Inc (Google  Yahoo  Earnings  Chart) 
BCRX,Biocryst Pharmaceuticals (Google  Yahoo  Earnings  Chart) 
CBS,CBS Corp Class B (Google  Yahoo  Earnings  Chart) 
CC,Circuit Cty Strs Inc (Google  Yahoo  Earnings  Chart) 
CLC,Clarcor Inc (Google  Yahoo  Earnings  Chart) 
COT,Cott Corporation (Google  Yahoo  Earnings  Chart) 
INFY,Infosys Technologies Ads (Google  Yahoo  Earnings  Chart) 
ISLN,Isilon Systems Inc (Google  Yahoo  Earnings  Chart) 
JBHT,JB Hunt Transport Services (Google  Yahoo  Earnings  Chart) 
JCOM,J2 Global Communications (Google  Yahoo  Earnings  Chart) 
KSP,K-sea Transportation Ptnr (Google  Yahoo  Earnings  Chart) 
LQDT,Liquidity Services (Google  Yahoo  Earnings  Chart) 
MAIL,Incredimail (Google  Yahoo  Earnings  Chart) 
MLHR,Herman Miller Inc (Google  Yahoo  Earnings  Chart) 
MNRO,Monro Muffler Brake Inc (Google  Yahoo  Earnings  Chart) 
ODFL,Old Dominion Freight Lne (Google  Yahoo  Earnings  Chart) 
PGNX,Progenics Pharm Inc (Google  Yahoo  Earnings  Chart) 
PLCM,Polycom Inc (Google  Yahoo  Earnings  Chart) 
SFN,Spherion Corporation (Google  Yahoo  Earnings  Chart) 
SLP,Simulations Plus Inc (Google  Yahoo  Earnings  Chart) 
SMTS,Somanetics Corp (Google  Yahoo  Earnings  Chart) 
SWIR,Sierra Wireless Inc (Google  Yahoo  Earnings  Chart) 
VDSI,Vasco Data Security Intl (Google  Yahoo  Earnings  Chart) 
VSE,VeraSun Energy Corp (Google  Yahoo  Earnings  Chart) 

Buying Opportunities

Below the surface there were 140 bullish breakouts in my scans. There is no shortage of opportunities for long positions currently.

Some Selected Buy Signals:

APOG,Apogee Enterprises Inc (Google  Yahoo  Earnings  Chart) 
CAAS,China Automotive Systems Inc (Google  Yahoo  Earnings  Chart) 
CPSL,China Precision Steel Inc (Google  Yahoo  Earnings  Chart) 
EFUT,E-Future Info Tech Inc Ord (Google  Yahoo  Earnings  Chart) 
EXAS,Exact Sciences (Google  Yahoo  Earnings  Chart) 
HYGS,Hydrogenics Corporation (Google  Yahoo  Earnings  Chart) 
MNG,Miramar Mining Corp (Google  Yahoo  Earnings  Chart) 
NTCT,Netscout Systems Inc (Google  Yahoo  Earnings  Chart) 
OSIR,Osiris Therapeutics Inc (Google  Yahoo  Earnings  Chart) 
PKE,Park Electrochemical Cp (Google  Yahoo  Earnings  Chart) 
ROCM,Rochester Medical Corp (Google  Yahoo  Earnings  Chart) 
TMY,Transmeridian Exploration Inc (Google  Yahoo  Earnings  Chart) 
TRE,Tanzanian Royalty Exploration Corp (Google  Yahoo  Earnings  Chart) 

Market Monitor

• After two days of red hot momentum, market had a rest day yesterday.
  
• There is action on both side currently. There were stellar blowout moves on over 35 stocks . There were some nasty reversals also.
  
• The kind of action we saw yesterday is normal action after few days of excellent momentum. Short term players take their profit, overextended stocks reverse. This sets up for further gains as earlier gains are digested.
• Dip buyers will be active in the market and we should see further upside fueled by cash on the sideline.

Some nasty reversals

While overall action was very positive, there were some very nasty high volume reversals. In many of these cases , these stocks had a high volume breakout just a day earlier. Stock specific catalyst will start to come in play once the overall euphoric mood settles down.

Stocks down 4% or more on high volume

AIR,Aar Corp (Google  Yahoo  Earnings  Chart) 
AOS,A O Smith Corporation (Google  Yahoo  Earnings  Chart) 
ARO,Aeropostale Inc (Google  Yahoo  Earnings  Chart) 
ARTE,Artes Medical Inc (Google  Yahoo  Earnings  Chart) 
ASX,Advanced Semicondctr Ads (Google  Yahoo  Earnings  Chart) 
CALM,Cal-Maine Foods Inc (Google  Yahoo  Earnings  Chart) 
CHIP,Verichip Corporation (Google  Yahoo  Earnings  Chart) 
CNQ,Canadian Natural Res Ltd (Google  Yahoo  Earnings  Chart) 
ECLP,Eclipsys Corporation (Google  Yahoo  Earnings  Chart) 
EGLE,Eagle Bulk Shipping Inc (Google  Yahoo  Earnings  Chart) 
ETV,Eaton Vance Tax-Managed Buy-Write Opportunities Fund (Google  Yahoo  Earnings  Chart) 
FTO,Frontier Oil Corp (Google  Yahoo  Earnings  Chart) 
HNAB,Hana Biosciences Inc (Google  Yahoo  Earnings  Chart) 
HOV,Hovnanian Enterprises A (Google  Yahoo  Earnings  Chart) 
ID,L-1 Identity Solutions Inc (Google  Yahoo  Earnings  Chart) 
IDEV,Indevus Pharmaceuticals Inc (Google  Yahoo  Earnings  Chart) 
IIIN,Insteel Industries Inc (Google  Yahoo  Earnings  Chart) 
IMB,Indymac Bancorp Inc (Google  Yahoo  Earnings  Chart) 
KMX,Carmax Inc (Google  Yahoo  Earnings  Chart) 
MAS,Masco Corp (Google  Yahoo  Earnings  Chart) 
MCGC,Mcg Capital (Google  Yahoo  Earnings  Chart) 
NIS,Nis Group Co Ltd (Google  Yahoo  Earnings  Chart) 
NTRI,NutriSystem Inc (Google  Yahoo  Earnings  Chart) 
NZT,Telecom Cp Of New Zealnd (Google  Yahoo  Earnings  Chart) 
PBY,Pep Boys Manny Moe&Jack (Google  Yahoo  Earnings  Chart) 
PQ,Petroquest Energy Inc (Google  Yahoo  Earnings  Chart) 
PWAV,Powerwave Technologies (Google  Yahoo  Earnings  Chart) 
QI,Qimonda AG (Google  Yahoo  Earnings  Chart) 
RHD,R.H. Donnelley Corp (Google  Yahoo  Earnings  Chart) 
RNT,Aaron Rents Inc (Google  Yahoo  Earnings  Chart) 
SILC,Silicom Ltd (Google  Yahoo  Earnings  Chart) 
SIRI,Sirius Satellite Radio (Google  Yahoo  Earnings  Chart) 
SNDA,Shanda Interactive Ent Ltd (Google  Yahoo  Earnings  Chart) 
SU,Suncor Energy (Google  Yahoo  Earnings  Chart) 
SVN,Sun-Times Media Group (Google  Yahoo  Earnings  Chart) 
SYNM,Syntroleum Corporation (Google  Yahoo  Earnings  Chart) 
TEL,Tyco Electronics Ltd (Google  Yahoo  Earnings  Chart) 
THRX,Theravance Inc (Google  Yahoo  Earnings  Chart) 
TTG,Tutogen Medical Inc (Google  Yahoo  Earnings  Chart) 
UBA,Urstadt Biddle Properties (Google  Yahoo  Earnings  Chart) 
USU,Usec Inc (Google  Yahoo  Earnings  Chart) 
WINN,Winn-Dixie Stores Inc (Google  Yahoo  Earnings  Chart) 
WSM,Williams Sonoma Inc (Google  Yahoo  Earnings  Chart) 
WZEN,Webzen Inc (Google  Yahoo  Earnings  Chart) 
XMSR,Xm Satellite Radio Hldgs (Google  Yahoo  Earnings  Chart) 

Market Monitor

• Bulls are clearly in control with over 250 breakouts on upside. There was some pulback and nasty reversals on some names, but at the end of day bulls were firmly in control.
• At some stage the short term players will start locking in their profit and we should see a reaction in a day or two.
  
• If you are under invested or scared of chasing 4 or 5 dollar breakouts, you will have to be just patient , when market seems like runaway train, at some stage reactions do happen and offer better lower risk entries. That is the nature of the market.
• It is clearly a broad based the advance as all indicators are showing. The indicator to watch currently is stocks up 50% or more in month, once it starts galloping past 20, a reaction is high probability.
  

Follow through

When the rally gets going, strength is followed by more strength. Chasing breakouts can be very profitable activity. Very tight stops work and momentum takes stocks beyond expected prices. That part of the move is easiest and most profitable to trade. Stocks under such favorable circumstances can make 25% plus moves in a jiffy. Which is what has happened in recent few days.

Buy Signals
AERO,Aero Grow Intl Inc (Google  Yahoo  Earnings  Chart) 
APPY,AspenBio Pharma Inc (Google  Yahoo  Earnings  Chart) 
ATCO,American Techology Corp (Google  Yahoo  Earnings  Chart) 
AXE,Anixter International (Google  Yahoo  Earnings  Chart) 
BEAV,Be Aerospace Inc (Google  Yahoo  Earnings  Chart) 
BKHM,Bookham Inc (Google  Yahoo  Earnings  Chart) 
BX,The Blackstone Group L.P (Google  Yahoo  Earnings  Chart) 
CHH,Choice Hotels International Inc (Google  Yahoo  Earnings  Chart) 
CLNE,Clean Energy Fuels Corp (Google  Yahoo  Earnings  Chart) 
CNQR,Concur Technologies Inc (Google  Yahoo  Earnings  Chart) 
COH,Coach Inc (Google  Yahoo  Earnings  Chart) 
CPO,Corn Products Intl Inc (Google  Yahoo  Earnings  Chart) 
CRNT,Ceragon Networks Ltd (Google  Yahoo  Earnings  Chart) 
CTCH,Commtouch Software Ltd (Google  Yahoo  Earnings  Chart) 
CV,Central Vermont Pub Svc (Google  Yahoo  Earnings  Chart) 
DAL,Delta Air Lines Inc (Google  Yahoo  Earnings  Chart) 
DSTI,Daystar Technologies Inc (Google  Yahoo  Earnings  Chart) 
ENG,Englobal Corp (Google  Yahoo  Earnings  Chart) 
FMR,First Mercury Financial Corp (Google  Yahoo  Earnings  Chart) 
FUR,Winthrop Realty Trust Inc (Google  Yahoo  Earnings  Chart) 
GLNG,Golar Lng Limited (Google  Yahoo  Earnings  Chart) 
GMKT,GMarket Inc (Google  Yahoo  Earnings  Chart) 
IFLO,I-Flow Corp (Google  Yahoo  Earnings  Chart) 
KAMN,Kaman Corp (Google  Yahoo  Earnings  Chart) 
LULU,Lululemon Athletica Inc. (Google  Yahoo  Earnings  Chart) 
MELI,Mercadolibre Inc. (Google  Yahoo  Earnings  Chart) 
NM,Navios Maritime Holdings Inc (Google  Yahoo  Earnings  Chart) 
NTLS,NTELOS Holdings Corp (Google  Yahoo  Earnings  Chart) 
PLXS,Plexus Corp (Google  Yahoo  Earnings  Chart) 
QXM,Qiao Xing Mobile Com (Google  Yahoo  Earnings  Chart) 
RATE,Bankrate Inc (Google  Yahoo  Earnings  Chart) 
RNVS,Renovis (Google  Yahoo  Earnings  Chart) 
ROC,Rockwood Holdings Inc (Google  Yahoo  Earnings  Chart) 
SHOR,Shortel Inc (Google  Yahoo  Earnings  Chart) 
SRCL,Stericycle Inc (Google  Yahoo  Earnings  Chart) 
TASR,Taser International Inc (Google  Yahoo  Earnings  Chart) 
TDSC,3d Systems Corp (Google  Yahoo  Earnings  Chart) 
TK,Teekay Corp (Google  Yahoo  Earnings  Chart) 
TLEO,Taleo Corp (Google  Yahoo  Earnings  Chart) 
TRAK,DealerTrack Holdings Inc (Google  Yahoo  Earnings  Chart) 
TRMS,Trimeris Inc (Google  Yahoo  Earnings  Chart) 
USPH,U.S. Physical Therapy (Google  Yahoo  Earnings  Chart) 
VRAZ,Veraz Networks Inc. (Google  Yahoo  Earnings  Chart) 
WCN,Waste Connections Inc (Google  Yahoo  Earnings  Chart) 
WGOV,Woodward Governor Co (Google  Yahoo  Earnings  Chart) 
ZINC,Horsehead Hldg Corp. (Google  Yahoo  Earnings  Chart) 

1022 breakouts

Market got the necessary boost it was hankering for and that is reflected in number of breakouts. 1022 positive breakouts for the day. With so many choices , there should be no shortage of buy candidates.

Here is a list of selected 50 or so breakouts to focus on:

ABB,Abb Ltd (Google  Yahoo  Earnings  Chart) 
ALXN,Alexion Pharmaceuticals (Google  Yahoo  Earnings  Chart) 
AMN,Ameron Internat Corp (Google  Yahoo  Earnings  Chart) 
AMRI,Albany Molecular Rsrch (Google  Yahoo  Earnings  Chart) 
AOS,A O Smith Corporation (Google  Yahoo  Earnings  Chart) 
AP,Ampco-Pittsburgh Corp (Google  Yahoo  Earnings  Chart) 
APD,Air Products & Chemicals (Google  Yahoo  Earnings  Chart) 
AXTI,Axt Inc (Google  Yahoo  Earnings  Chart) 
BMI,Badger Meter Inc (Google  Yahoo  Earnings  Chart) 
BOOM,Dynamic Materials Corp (Google  Yahoo  Earnings  Chart) 
BQI,Oilsands Quest Inc (Google  Yahoo  Earnings  Chart) 
CKSW,Clicksoftware Technlgies (Google  Yahoo  Earnings  Chart) 
CYPB,Cypress Bioscience Inc (Google  Yahoo  Earnings  Chart) 
DCOM,Dime Community Bancshare (Google  Yahoo  Earnings  Chart) 
DECK,Deckers Outdoor Corp (Google  Yahoo  Earnings  Chart) 
DTSI,DTS Inc (Google  Yahoo  Earnings  Chart) 
EGLE,Eagle Bulk Shipping Inc (Google  Yahoo  Earnings  Chart) 
EGOV,Nic Inc (Google  Yahoo  Earnings  Chart) 
ELMG,Ems Technologies Inc (Google  Yahoo  Earnings  Chart) 
EMKR,Emcore Corporation (Google  Yahoo  Earnings  Chart) 
EPAY,Bottomline Technologies (Google  Yahoo  Earnings  Chart) 
FARO,Faro Technologies Inc (Google  Yahoo  Earnings  Chart) 
FMC,Fmc Corp (Google  Yahoo  Earnings  Chart) 
GEO,Geo Group (The) (Google  Yahoo  Earnings  Chart) 
HEI,Heico Corp (Google  Yahoo  Earnings  Chart) 
HNR,Harvest Natural Resources Inc (Google  Yahoo  Earnings  Chart) 
HNSN,Hansen Medical Inc (Google  Yahoo  Earnings  Chart) 
IGTE,Igate Corporaion (Google  Yahoo  Earnings  Chart) 
INTV,Intervoice-Brite Inc (Google  Yahoo  Earnings  Chart) 
KOP,Koppers Holdings (Google  Yahoo  Earnings  Chart) 
LKQX,LKQ Corp (Google  Yahoo  Earnings  Chart) 
LMNX,Luminex Corporation (Google  Yahoo  Earnings  Chart) 
LXU,Lsb Industries Inc (Google  Yahoo  Earnings  Chart) 
MPWR,Monolithic Power Systems (Google  Yahoo  Earnings  Chart) 
MUR,Murphy Oil Corp (Google  Yahoo  Earnings  Chart) 
NVTL,Novatel Wireless Inc (Google  Yahoo  Earnings  Chart) 
PAS,Pepsiamericas Inc (Google  Yahoo  Earnings  Chart) 
PCP,Precision Castparts Corp (Google  Yahoo  Earnings  Chart) 
PEGA,Pegasystems Inc (Google  Yahoo  Earnings  Chart) 
PSMT,Pricesmart Inc (Google  Yahoo  Earnings  Chart) 
PTIE,Pain Therapeutics Inc (Google  Yahoo  Earnings  Chart) 
RGLD,Royal Gold Inc (Google  Yahoo  Earnings  Chart) 
RGR,Sturm Ruger & Co Inc (Google  Yahoo  Earnings  Chart) 
RRST,RRsat Glo Comm Network Ltd Ord (Google  Yahoo  Earnings  Chart) 
RZ,Raser Technologies Inc (Google  Yahoo  Earnings  Chart) 
SGEN,Seattle Genetic (Google  Yahoo  Earnings  Chart) 
SGK,Schawk Inc (Google  Yahoo  Earnings  Chart) 
SWHC,Smith & Wesson Hldg Corp (Google  Yahoo  Earnings  Chart) 
SYNT,Syntel Inc (Google  Yahoo  Earnings  Chart) 
TDY,Teledyne Technologies (Google  Yahoo  Earnings  Chart) 
UA,Under Armour Inc (Google  Yahoo  Earnings  Chart) 
UMBF,Umb Financial Corp (Google  Yahoo  Earnings  Chart) 
UXG,US Gold Corporation (Google  Yahoo  Earnings  Chart) 

FOMC

The Federal Open Market Committee decided today to lower its target for the federal funds rate 50 basis points to 4-3/4 percent.

Economic growth was moderate during the first half of the year, but the tightening of credit conditions has the potential to intensify the housing correction and to restrain economic growth more generally. Today’s action is intended to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time.

Readings on core inflation have improved modestly this year. However, the Committee judges that some inflation risks remain, and it will continue to monitor inflation developments carefully.

Developments in financial markets since the Committee’s last regular meeting have increased the uncertainty surrounding the economic outlook. The Committee will continue to assess the effects of these and other developments on economic prospects and will act as needed to foster price stability and sustainable economic growth.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Timothy F. Geithner, Vice Chairman; Charles L. Evans; Thomas M. Hoenig; Donald L. Kohn; Randall S. Kroszner; Frederic S. Mishkin; William Poole; Eric Rosengren; and Kevin M. Warsh.

In a related action, the Board of Governors unanimously approved a 50-basis-point decrease in the discount rate to 5-1/4 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of Boston, New York, Cleveland, St. Louis, Minneapolis, Kansas City, and San Francisco.

How bad debt went global

The Telegraph has this very interesting story which chronicles how the sub prime problem which started in small section of US mortgage market spread to worldwide market. Banks in UK and Germany have taken serious beating because of this problem. The article is fascinating behind the scene look at the problem.

The foreclosure butterfly flapped its wings in smalltown USA and the hurricane built up and tore through world banking. Iain Dey reports

Cathy Busby has never met Mick Mayor. The 47-year-old hospital administrator from Colorado had no idea that when she fell behind with the mortgage payments on her three-bedroom home in the Denver suburbs, it would stop Barclays extending the overdraft limit on Mayor's business four months later.

But this is the true story of the global credit crunch. What seemed initially to be a problem in the US housing market is now forcing up the cost of borrowing here in Britain, having swept from Denver to Darlington.

Negative Movers

In a volatile market environment 100 plus breakdowns to downside are becoming a common phenomenon. Plus shorts are working as we are in correction. So there is lot to chose from the following stocks down 4% or more on high volume.

ACTG,Acacia Research Acacia Tech (Google  Yahoo  Earnings  Chart) 
ADBL,Audible Inc (Google  Yahoo  Earnings  Chart) 
ADSX,Applied Digital Solution (Google  Yahoo  Earnings  Chart) 
AEIS,Advanced Energy Ind Inc (Google  Yahoo  Earnings  Chart) 
AFSI,AmTrust Financial Services Inc. (Google  Yahoo  Earnings  Chart) 
ALU,Alcatel-Lucent (Google  Yahoo  Earnings  Chart) 
APKT,Acme Packet Inc (Google  Yahoo  Earnings  Chart) 
ARRS,Arris Group Inc (Google  Yahoo  Earnings  Chart) 
ARTE,Artes Medical Inc (Google  Yahoo  Earnings  Chart) 
AVR,Aventine Renewable Energy Holdings Inc (Google  Yahoo  Earnings  Chart) 
AXTI,Axt Inc (Google  Yahoo  Earnings  Chart) 
BAK,Braskem Sa (Google  Yahoo  Earnings  Chart) 
BKI,Buckeye Technologies Inc (Google  Yahoo  Earnings  Chart) 
BMD,Birch Mountain Resources Ltd (Google  Yahoo  Earnings  Chart) 
BMTI,BioMimetic Therapeutics Inc (Google  Yahoo  Earnings  Chart) 
BPUR,Biopure Corporation (Google  Yahoo  Earnings  Chart) 
BQI,Oilsands Quest Inc (Google  Yahoo  Earnings  Chart) 
CAE,Cascade Corp (Google  Yahoo  Earnings  Chart) 
CAS,A.M. Castle & Company (Google  Yahoo  Earnings  Chart) 
CENT,Central Garden & Pet Co (Google  Yahoo  Earnings  Chart) 
CENTA,Central Garden & Pet Co. (Google  Yahoo  Earnings  Chart) 
CHUX,O'charley's Inc (Google  Yahoo  Earnings  Chart) 
CIG,Companhia Energetica Mines (Google  Yahoo  Earnings  Chart) 
CLWT,Euro Tech Holdings Ltd (Google  Yahoo  Earnings  Chart) 
CMRG,Casual Male Retail Grp Inc (Google  Yahoo  Earnings  Chart) 
CNTY,Century Casinos Inc (Google  Yahoo  Earnings  Chart) 
CRGN,Curagen Corp (Google  Yahoo  Earnings  Chart) 
CRY,Cryolife Inc (Google  Yahoo  Earnings  Chart) 
CT,Capital Trust Inc Md (Google  Yahoo  Earnings  Chart) 
DVAX,Dynavax Tech (Google  Yahoo  Earnings  Chart) 
ELP,Companhia Paranaense De (Google  Yahoo  Earnings  Chart) 
ENT,Enterra Energy Corp (Google  Yahoo  Earnings  Chart) 
ERS,Empire Resources (Google  Yahoo  Earnings  Chart) 
GHL,Greenhill & Co (Google  Yahoo  Earnings  Chart) 
HDY,HyperDynamics Corp (Google  Yahoo  Earnings  Chart) 
HEES,H&E Equipment Services (Google  Yahoo  Earnings  Chart) 
HIRE,HireRight Inc (Google  Yahoo  Earnings  Chart) 
HMX,Hartmarx Corp (Google  Yahoo  Earnings  Chart) 
IDMI,IDM Pharma Inc (Google  Yahoo  Earnings  Chart) 
IHG,Intercontinental Hotels Grp Ad (Google  Yahoo  Earnings  Chart) 
IMAX,Imax Corp (Google  Yahoo  Earnings  Chart) 
IMGN,Immunogen Inc (Google  Yahoo  Earnings  Chart) 
IMH,Impac Mortgage Holdings (Google  Yahoo  Earnings  Chart) 
IRBT,iRobot Corp (Google  Yahoo  Earnings  Chart) 
IRE,Governor & Co Bk Ireland (Google  Yahoo  Earnings  Chart) 
JAV,Javelin Pharmaceuticals Inc (Google  Yahoo  Earnings  Chart) 
KBALB,Kimball Internat B (Google  Yahoo  Earnings  Chart) 
KCAP,Kohlberg Capital Corp (Google  Yahoo  Earnings  Chart) 
LBY,Libbey Inc (Google  Yahoo  Earnings  Chart) 
LEE,Lee Enterprises Inc (Google  Yahoo  Earnings  Chart) 
LFG,Landamerica Fncl Grp Inc (Google  Yahoo  Earnings  Chart) 
LORL,Loral Space & Communications Inc (Google  Yahoo  Earnings  Chart) 
LPHI,Life Partners Inc (Google  Yahoo  Earnings  Chart) 
LTS,Ladenburg Thalmann Finl (Google  Yahoo  Earnings  Chart) 
LYV,Live Nation Inc (Google  Yahoo  Earnings  Chart) 
MEA,Metalico Inc (Google  Yahoo  Earnings  Chart) 
MGAM,Multimedia Games Inc (Google  Yahoo  Earnings  Chart) 
MHGC,Morgans Hotel Group Co (Google  Yahoo  Earnings  Chart) 
MMC,Marsh & Mclennan Cos Inc (Google  Yahoo  Earnings  Chart) 
MWY,Midway Games Inc (Google  Yahoo  Earnings  Chart) 
NCI,Navigant Consulting Inc (Google  Yahoo  Earnings  Chart) 
NDN,99 Cents Only Stores (Google  Yahoo  Earnings  Chart) 
NETC,Net Servicos De Comunicado Ads (Google  Yahoo  Earnings  Chart) 
NR,Newpark Resources Inc (Google  Yahoo  Earnings  Chart) 
NTG,Natco Group Incorporated (Google  Yahoo  Earnings  Chart) 
OII,Oceaneering Internat (Google  Yahoo  Earnings  Chart) 
OMI,Owens & Minor Inc (Google  Yahoo  Earnings  Chart) 
OSIR,Osiris Therapeutics Inc (Google  Yahoo  Earnings  Chart) 
PANC,Panacos Pharmaceuticals Inc (Google  Yahoo  Earnings  Chart) 
PBH,Prestige Brands Holdings (Google  Yahoo  Earnings  Chart) 
PCR,Perini Corp (Google  Yahoo  Earnings  Chart) 
PGTI,PGT Inc (Google  Yahoo  Earnings  Chart) 
PHH,Phh Corp (Google  Yahoo  Earnings  Chart) 
PIR,Pier 1 Imports Inc (Google  Yahoo  Earnings  Chart) 
PSEC,Prospect Street Energy Corp (Google  Yahoo  Earnings  Chart) 
PTI,Patni Computer Systems Ltd ADR (Google  Yahoo  Earnings  Chart) 
RDNT,RadNet Inc. (Google  Yahoo  Earnings  Chart) 
REGN,Regeneron Pharm Inc (Google  Yahoo  Earnings  Chart) 
RYAAY,Ryanair Hldgs Plc Adr (Google  Yahoo  Earnings  Chart) 
SGN,Signalife Inc (Google  Yahoo  Earnings  Chart) 
SKS,Saks Holdings Inc (Google  Yahoo  Earnings  Chart) 
SPEC,Spectrum Control Inc (Google  Yahoo  Earnings  Chart) 
SVN,Sun-Times Media Group (Google  Yahoo  Earnings  Chart) 
SYK,Stryker Corp (Google  Yahoo  Earnings  Chart) 
TICC,Technology Investment Cap Corp (Google  Yahoo  Earnings  Chart) 
TKS,Tomkins Plc Adr (Google  Yahoo  Earnings  Chart) 
TOA,Technical Olympic Usa Inc (Google  Yahoo  Earnings  Chart) 
TRT,Trio-Tech Internat (Google  Yahoo  Earnings  Chart) 
TRY.B,Triarc Co Cl B (Google  Yahoo  Earnings  Chart) 
UEIC,Universal Electronics (Google  Yahoo  Earnings  Chart) 
URZ,Uranerz Energy Corp (Google  Yahoo  Earnings  Chart) 
VMW,Vmware Inc (Google  Yahoo  Earnings  Chart) 
VOLC,Volcano Corp (Google  Yahoo  Earnings  Chart) 
VRTX,Vertex Pharmaceuticals (Google  Yahoo  Earnings  Chart) 
VRX,Valeant Pharmaceuticals (Google  Yahoo  Earnings  Chart) 
VSCI,Vision Sciences Inc (Google  Yahoo  Earnings  Chart) 
VSCN,Visual Sciences Inc (Google  Yahoo  Earnings  Chart) 
WON,Westwood One Inc (Google  Yahoo  Earnings  Chart) 
WOS,Wolseley Plc (Google  Yahoo  Earnings  Chart) 
WTSLA,Wet Seal Inc Cl A The (Google  Yahoo  Earnings  Chart) 
XRTX,Xyratex Ltd (Google  Yahoo  Earnings  Chart) 


With so many stocks to look at, here is a handy list of stocks to focus on for further study and possible short positions.
ACTG, APKT, ARRS, AVR, CAE, CRY, IRBT, LEE, LORL, LPHI, MMC, NCI, NTG, OII, OMI, PCR, SKS, SYK, VMW, VRTX, XRTX.

Positive Movers

After four days of positive action, today was a negative day with 54 breakouts on bullish side and 101 on bearish side. Dip buyers could not put together a meaningful rally. With Fed expectations driving the market , volume was lower. The small caps are where there is greater bearish pressure currently.

Bullish Action
AIRV,Airvana Inc (Google  Yahoo  Earnings  Chart) 
ALNY,Alnylam Pharmaceuticals (Google  Yahoo  Earnings  Chart) 
ANW,Aegean Marine Petroleum Network Inc (Google  Yahoo  Earnings  Chart) 
AXYS,Axsys Technologies (Google  Yahoo  Earnings  Chart) 
AZS,Arizona Star Resource Corp (Google  Yahoo  Earnings  Chart) 
BIDU,Baidu.com Inc (Google  Yahoo  Earnings  Chart) 
BOBJ,Business Objects S A (Google  Yahoo  Earnings  Chart) 
CDIC,Cardiodynamics Intl Corp (Google  Yahoo  Earnings  Chart) 
CONN,Conn's Inc (Google  Yahoo  Earnings  Chart) 
CSUN,China Sunergy Co Ltd (Google  Yahoo  Earnings  Chart) 
EDO,Edo Corp (Google  Yahoo  Earnings  Chart) 
EGY,Vaalco Energy Inc (Google  Yahoo  Earnings  Chart) 
ETQ,Corriente Resources Inc (Google  Yahoo  Earnings  Chart) 
FDP,Fresh Del Monte Produce (Google  Yahoo  Earnings  Chart) 
FDRY,Foundry Networks Inc (Google  Yahoo  Earnings  Chart) 
FMCN,Focus Media Holding Ltd ADR (Google  Yahoo  Earnings  Chart) 
FMD,First Marblehead Corp (Google  Yahoo  Earnings  Chart) 
FTK,Flotek Industries Inc (Google  Yahoo  Earnings  Chart) 
HH,Hooper Holmes Inc (Google  Yahoo  Earnings  Chart) 
IGLD,Internet Gold-Golden (Google  Yahoo  Earnings  Chart) 
INSP,Infospace Incorporated (Google  Yahoo  Earnings  Chart) 
ITI,Iteris Inc (Google  Yahoo  Earnings  Chart) 
KONA,Kona Grill Inc (Google  Yahoo  Earnings  Chart) 
LCRY,Lecroy Corp (Google  Yahoo  Earnings  Chart) 
LIFC,Lifecell Corporation (Google  Yahoo  Earnings  Chart) 
LOCM,Local.Com Corp (Google  Yahoo  Earnings  Chart) 
LVS,Las Vegas Sands (Google  Yahoo  Earnings  Chart) 
MBLX,Metabolix Inc (Google  Yahoo  Earnings  Chart) 
MOVI,Movie Gallery Inc (Google  Yahoo  Earnings  Chart) 
NWL,Newell Rubbermaid Inc (Google  Yahoo  Earnings  Chart) 
OCLS,Oculus Innovative Sciences Inc (Google  Yahoo  Earnings  Chart) 
ONSM,Onstream Media (Google  Yahoo  Earnings  Chart) 
PODD,Insulet Corporation (Google  Yahoo  Earnings  Chart) 
PRW,Pro-pharmaceuticals Inc (Google  Yahoo  Earnings  Chart) 
QSFT,Quest Software Inc (Google  Yahoo  Earnings  Chart) 
QXM,Qiao Xing Mobile Com (Google  Yahoo  Earnings  Chart) 
RVBD,Riverbed Technologies Inc (Google  Yahoo  Earnings  Chart) 
SIGM,Sigma Designs Inc (Google  Yahoo  Earnings  Chart) 
SLP,Simulations Plus Inc (Google  Yahoo  Earnings  Chart) 
SMBL,Smart Balance Inc (Google  Yahoo  Earnings  Chart) 
SNDA,Shanda Interactive Ent Ltd (Google  Yahoo  Earnings  Chart) 
SNUS,Sonus Pharm Inc (Google  Yahoo  Earnings  Chart) 
STST,Argon St Inc (Google  Yahoo  Earnings  Chart) 
TPC,Suncom Wireless Hldgs Inc (Google  Yahoo  Earnings  Chart) 
ULBI,Ultralife Batteries Inc (Google  Yahoo  Earnings  Chart) 
USEY,U.S. Energy Systems Inc (Google  Yahoo  Earnings  Chart) 
UTSI,UTStarcom Inc (Google  Yahoo  Earnings  Chart) 
UVE,Universal Insurance Holdings (Google  Yahoo  Earnings  Chart) 
VSGN,Vasogen Inc (Google  Yahoo  Earnings  Chart) 
WGAT,Worldgate Communications (Google  Yahoo  Earnings  Chart) 
WHI,W Holding Company (Google  Yahoo  Earnings  Chart) 
XING,Qiao Xing Univ Telephone (Google  Yahoo  Earnings  Chart) 
XNL,Xethanol Corp (Google  Yahoo  Earnings  Chart) 
ZVUE,Handheld Entertainment Inc (Google  Yahoo  Earnings  Chart) 


Some notable breakouts out of this list are: LIFC, ALNY, LVS, BIDU, SNDA, and SIGM, these stocks continued to gain post their recent weeks breakout.
Some notable fresh breakouts are: FDRY, FDP, AXYS, QSFT,FMCN, and NWL.

Later: Negative Movers

Dip buyers

A bit of surprising action ahead of Fed meeting. No sign of dip buyers since early weak action. The selling has been mild so far, but the inability to mount a bounce looks a bit out of character for this market. The market so far has time and again rebounded from set backs and negative news. So may be dip buyers will show up later today.

Hot headed investors make better decisions

There is an entire army of trading psychologist who emphasize emotional control is the key. This study finds the reverse is true.

NEW YORK (Reuters) - Sometimes it's best not to keep your cool.

In fact, hot-headed stock investors make better decisions, a study in the Academy of Management Journal showed.

Adding emotions to the decision-making process can enhance creativity, engagement and decision efficiency, Myeong-Gu Seo of the University of Maryland and Lisa Feldman Barrett of Boston College wrote in a study published in the August/September issue.

The greater the average intensity of an individual's feelings, the higher their investment returns, the professors found. The study monitored 101 stock investors in a simulated trading exercise spanning four weeks

"Contrary to the popular belief that the cooler head prevails, people with hot heads -- those who experienced their feelings with greater intensity during decision-making -- achieved higher decision-making performance," they wrote.

Greenspan FT interview

Financial Times has interview with Greenspan , ahead of publication of his book The Age of Turbulence: Adventures in a New World. He predicts further drop in home prices and dim future for collateralised debt obligations. Interesting perspective from the former Fed chief.

The former chairman said the current turmoil in financial markets was “an accident waiting to happen”.

He said the price of risk had fallen to unsustainably low levels beforehand, with investors addicted to asset-backed securities that offered some additional yield over Treasury bonds as if they were “cocaine”. Mr Greenspan said this demand induced the big increase in the origination of subprime mortgages by mortgage brokers.

The rise in defaults on subprime mortgages was only the trigger that set off a broad re-evaluation of risk, he argued.

Mr Greenspan said the off-balance sheet investment vehicles that issued much of the asset-backed commercial paper represented a “savings and loans disaster waiting to happen” because of the mismatch between their assets and liabilities. Mr Greenspan thought the issuance of asset-backed commercial paper ”is probably not going to get back to where it was.”

They had “five-year maturity assets financed with 30-day commercial paper”, he said.

The former Fed chairman said collateralised debt obligations – securities that slice up and repackage loans to meet the risk-appetite of different investors – “will never get back to the levels and structures that they were, because now everybody knows you cannot price them”.

He added that in an innovative financial market “there will always be products that fail”.

Sector Strength and Weakness

Sectors in top and bottom decile for this week. Top sectors continue to be dominated by metals.

Bullish Sectors

MG113,Agricultural Chemicals (Google  Yahoo  Earnings  Chart) 
MG125,Oil & Gas Equip & Services (Google  Yahoo  Earnings  Chart) 
MG130,-Metals & Mining- (Google  Yahoo  Earnings  Chart) 
MG131,Steel & Iron (Google  Yahoo  Earnings  Chart) 
MG132,Copper (Google  Yahoo  Earnings  Chart) 
MG133,Aluminum (Google  Yahoo  Earnings  Chart) 
MG137,Nonmetallic Mineral Mining (Google  Yahoo  Earnings  Chart) 
MG342,Farm Products (Google  Yahoo  Earnings  Chart) 
MG517,Diagnostic Substances (Google  Yahoo  Earnings  Chart) 
MG529,Specialized Health Services (Google  Yahoo  Earnings  Chart) 
MG611,Aerospace/Defense-Major Dive (Google  Yahoo  Earnings  Chart) 
MG636,Heavy Construction (Google  Yahoo  Earnings  Chart) 
MG712,Resorts & Casinos (Google  Yahoo  Earnings  Chart) 
MG725,Broadcasting-Radio (Google  Yahoo  Earnings  Chart) 
MG739,Catalog & Mail Order Houses (Google  Yahoo  Earnings  Chart) 
MG768,Technical Services (Google  Yahoo  Earnings  Chart) 
MG811,Diversified Computer Systems (Google  Yahoo  Earnings  Chart) 
MG812,Personal Computers (Google  Yahoo  Earnings  Chart) 
MG815,Networking & Comm Dev (Google  Yahoo  Earnings  Chart) 
MG824,Security Software & Services (Google  Yahoo  Earnings  Chart) 
MG838,Scientific & Technical Instr (Google  Yahoo  Earnings  Chart) 
MG841,Wireless Communications (Google  Yahoo  Earnings  Chart) 
MG847,Diversified Communication Serv (Google  Yahoo  Earnings  Chart) 
MG851,Internet Service Providers (Google  Yahoo  Earnings  Chart) 


Bearish Sectors
MG313,Housewares & Accessories (Google  Yahoo  Earnings  Chart) 
MG328,Office Supplies (Google  Yahoo  Earnings  Chart) 
MG333,Recreational Vehicles (Google  Yahoo  Earnings  Chart) 
MG414,Regional-Southeast Banks (Google  Yahoo  Earnings  Chart) 
MG421,Investment Brokerage-National (Google  Yahoo  Earnings  Chart) 
MG425,Credit Services (Google  Yahoo  Earnings  Chart) 
MG434,Surety & Title Insurance (Google  Yahoo  Earnings  Chart) 
MG448,Mortgage Investment (Google  Yahoo  Earnings  Chart) 
MG525,Hospitals (Google  Yahoo  Earnings  Chart) 
MG631,Residential Construction (Google  Yahoo  Earnings  Chart) 
MG633,Lumber / Wood Production (Google  Yahoo  Earnings  Chart) 
MG634,Cement (Google  Yahoo  Earnings  Chart) 
MG717,General Entertainment (Google  Yahoo  Earnings  Chart) 
MG721,Advertising Agencies (Google  Yahoo  Earnings  Chart) 
MG722,Marketing Services (Google  Yahoo  Earnings  Chart) 
MG729,Publishing-Books (Google  Yahoo  Earnings  Chart) 
MG731,Department Stores (Google  Yahoo  Earnings  Chart) 
MG737,Home Furnishing Stores (Google  Yahoo  Earnings  Chart) 
MG738,Auto Parts Stores (Google  Yahoo  Earnings  Chart) 
MG742,Toy & Hobby Stores (Google  Yahoo  Earnings  Chart) 
MG744,Music & Video Stores (Google  Yahoo  Earnings  Chart) 
MG746,Specialty Retail - Other (Google  Yahoo  Earnings  Chart) 
MG752,Building Materials Wholesale (Google  Yahoo  Earnings  Chart) 
MG775,Trucking (Google  Yahoo  Earnings  Chart) 

Buy Buy Buy

FT Alphavile has links to Morgan Stanley strategist in Europe, Teun Draaisma's call on Europe market. It is a long analysis and makes interesting reading.

For a taste of the Morgan Stanley strategist, the best place to start is to click here. Or go straight to the full text of his latest note to clients using the links below.
Article Series - BUY BUY BUY

1. says Morgan Stanley's Draaisma
2. Draaisma's 'Think Big' - I
3. Draaisma's 'Think Big' - II
4. Draaisma's 'Think Big' - III
5. Draaisma's 'Think Big' - IV
6. Morgan Stanley's Super Bull

The basic hypothesis is this was a correction in bull market and we are far from top in equities ( for Europe).

Style Shift

Market at different times shifts between four predominant styles: large cap, small cap, value and growth. In recent times the large caps have been doing well. Even before the correction the Dow Jones was leading. There are numerous reason for such shifts and identifying such shifts early enough can offer a profitable edge.

In recent times market has been favoring large cap growth. Large cap stocks have been flying for sometime now. The move started many months back. The small caps are in dog house.

Here is a list of large cap stocks in top decile in terms of relative strength currently:

AAPL,Apple Inc (Google  Yahoo  Earnings  Chart) 
ABB,Abb Ltd (Google  Yahoo  Earnings  Chart) 
ABX,Barrick Gold Corp (Google  Yahoo  Earnings  Chart) 
ACGY,Acergy S.A. Ads (Google  Yahoo  Earnings  Chart) 
ACH,Aluminum Corp China (Google  Yahoo  Earnings  Chart) 
ACP,American Real Estate Prt (Google  Yahoo  Earnings  Chart) 
AEM,Agnico-Eagle Mines Ltd (Google  Yahoo  Earnings  Chart) 
AGU,Agrium Inc (Google  Yahoo  Earnings  Chart) 
AHO,Ahold N.V. (Google  Yahoo  Earnings  Chart) 
AL,Alcan Inc. (Google  Yahoo  Earnings  Chart) 
AMZN,Amazon.Com Inc (Google  Yahoo  Earnings  Chart) 
AV,Avaya Inc (Google  Yahoo  Earnings  Chart) 
AVT,Avnet Inc (Google  Yahoo  Earnings  Chart) 
BBL,BHP Billiton Plc Ads (Google  Yahoo  Earnings  Chart) 
BCE,Bce Inc (Google  Yahoo  Earnings  Chart) 
BG,Bunge Ltd (Google  Yahoo  Earnings  Chart) 
BHP,BHP Billiton Ltd (Google  Yahoo  Earnings  Chart) 
BIDU,Baidu.com Inc (Google  Yahoo  Earnings  Chart) 
BIIB,Biogen Idec Inc (Google  Yahoo  Earnings  Chart) 
BVN,Compania De Minas Buena (Google  Yahoo  Earnings  Chart) 
CAM,Cameron International Corp (Google  Yahoo  Earnings  Chart) 
CELG,Celgene Corp (Google  Yahoo  Earnings  Chart) 
CEO,CNOOC Ltd Adr (Google  Yahoo  Earnings  Chart) 
CGV,Cgg Veritas (Google  Yahoo  Earnings  Chart) 
CHL,China Mobile Ltd (Google  Yahoo  Earnings  Chart) 
CHU,China Unicom Ltd Ads (Google  Yahoo  Earnings  Chart) 
CMI,Cummins Inc (Google  Yahoo  Earnings  Chart) 
CNH,Cnh Global Nv (Google  Yahoo  Earnings  Chart) 
CNQ,Canadian Natural Res Ltd (Google  Yahoo  Earnings  Chart) 
COP,ConocoPhillips (Google  Yahoo  Earnings  Chart) 
CSCO,Cisco Systems Inc (Google  Yahoo  Earnings  Chart) 
CYTC,Cytyc Corporation (Google  Yahoo  Earnings  Chart) 
DADE,Dade Behring Holdings Inc (Google  Yahoo  Earnings  Chart) 
DE,Deere & Co (Google  Yahoo  Earnings  Chart) 
DISCA,Discovery Holding Co Class A (Google  Yahoo  Earnings  Chart) 
DNR,Denbury Resources Ltd (Google  Yahoo  Earnings  Chart) 
DO,Diamond Offshre Drilling (Google  Yahoo  Earnings  Chart) 
DVA,Davita Inc (Google  Yahoo  Earnings  Chart) 
EBAY,Ebay Inc (Google  Yahoo  Earnings  Chart) 
EMC,Emc Corp (Google  Yahoo  Earnings  Chart) 
ENR,Energizer Holdings (Google  Yahoo  Earnings  Chart) 
ESRX,Express Scripts Inc (Google  Yahoo  Earnings  Chart) 
EXPE,Expedia Inc (Google  Yahoo  Earnings  Chart) 
FCX,Freeport Mcmoran C&G B (Google  Yahoo  Earnings  Chart) 
FDG,Fording Canadian Coal Trust (Google  Yahoo  Earnings  Chart) 
FLR,Fluor Corp (New) (Google  Yahoo  Earnings  Chart) 
FSLR,First Solar Inc (Google  Yahoo  Earnings  Chart) 
FTI,Fmc Technologies (Google  Yahoo  Earnings  Chart) 
FWLT,Foster Wheeler Ltd (Google  Yahoo  Earnings  Chart) 
GME,Gamestop Corp (Google  Yahoo  Earnings  Chart) 
GR,Goodrich Corp (Google  Yahoo  Earnings  Chart) 
GRMN,Garmin Ltd (Google  Yahoo  Earnings  Chart) 
HDB,HDFC Bank Limited (Google  Yahoo  Earnings  Chart) 
HLT,Hilton Hotels Corp (Google  Yahoo  Earnings  Chart) 
HUN,Huntsman (Google  Yahoo  Earnings  Chart) 
ICE,Intercontinental Exchange Inc (Google  Yahoo  Earnings  Chart) 
INTC,Intel Corp (Google  Yahoo  Earnings  Chart) 
ISRG,Intuitive Surgical Inc (Google  Yahoo  Earnings  Chart) 
JEC,Jacobs Engineering Group (Google  Yahoo  Earnings  Chart) 
JNC,Nuveen Investments Inc Cl A (Google  Yahoo  Earnings  Chart) 
JNPR,Juniper Networks (Google  Yahoo  Earnings  Chart) 
KBR,KBR Inc. (Google  Yahoo  Earnings  Chart) 
LFC,China Life Insurance Company (Google  Yahoo  Earnings  Chart) 
LFL,Lan Chile Sa (Google  Yahoo  Earnings  Chart) 
LUK,Leucadia National Corp (Google  Yahoo  Earnings  Chart) 
LVS,Las Vegas Sands (Google  Yahoo  Earnings  Chart) 
LYO,Lyondell Chemical Co (Google  Yahoo  Earnings  Chart) 
MA,MasterCard Inc (Google  Yahoo  Earnings  Chart) 
MDR,Mcdermott Internat Inc (Google  Yahoo  Earnings  Chart) 
MGM,MGM MIRAGE Inc (Google  Yahoo  Earnings  Chart) 
MHS,Medco Health Solutions (Google  Yahoo  Earnings  Chart) 
MON,Monsanto Co (Google  Yahoo  Earnings  Chart) 
MOS,Mosaic Company (Google  Yahoo  Earnings  Chart) 
MT,Arcelor Mittal (Google  Yahoo  Earnings  Chart) 
MTL,Mechel Steel Group OAO ADS (Google  Yahoo  Earnings  Chart) 
NHY,Norsk Hydro As Adr (Google  Yahoo  Earnings  Chart) 
NOK,Nokia Corp Ads (Google  Yahoo  Earnings  Chart) 
NOV,National Oilwell Varco Inc (Google  Yahoo  Earnings  Chart) 
NVDA,NVIDIA Corporation (Google  Yahoo  Earnings  Chart) 
NVO,Novo Nordisk A/S (Google  Yahoo  Earnings  Chart) 
NVT,Navteq Corp (Google  Yahoo  Earnings  Chart) 
OI,Owens Illinois Inc (Google  Yahoo  Earnings  Chart) 
OXY,Occidental Petro Cp (Google  Yahoo  Earnings  Chart) 
PBR,Petroleo Brasileiro S.A. Petrobras ADS (Google  Yahoo  Earnings  Chart) 
PBR.A,Petroleo Brasileiro S.A. Petrobras ADS Class A (Google  Yahoo  Earnings  Chart) 
PCP,Precision Castparts Corp (Google  Yahoo  Earnings  Chart) 
PCU,Southern Copper Corp (Google  Yahoo  Earnings  Chart) 
PCZ,Petro-Canada (Google  Yahoo  Earnings  Chart) 
PKX,Posco (Google  Yahoo  Earnings  Chart) 
POT,Potash Cp Saskatchewan (Google  Yahoo  Earnings  Chart) 
RCI,Rogers Commun B Non-Votg (Google  Yahoo  Earnings  Chart) 
RIG,Transocean Inc (Google  Yahoo  Earnings  Chart) 
RIMM,Research In Motion Ltd (Google  Yahoo  Earnings  Chart) 
RIO,Companhia Vale Do Rio Doce (Google  Yahoo  Earnings  Chart) 
ROS,Rostelecom (Google  Yahoo  Earnings  Chart) 
RRI,Reliant Energy Inc (Google  Yahoo  Earnings  Chart) 
RTN,Raytheon Co (Google  Yahoo  Earnings  Chart) 
RTP,Rio Tinto Plc Adr (Google  Yahoo  Earnings  Chart) 
SAP,Sap Ag Ads (Google  Yahoo  Earnings  Chart) 
SBS,Companhia De Saneamento B (Google  Yahoo  Earnings  Chart) 
SID,Companhia Siderurgica Nacional S.A. (Google  Yahoo  Earnings  Chart) 
SII,Smith Internat Inc (Google  Yahoo  Earnings  Chart) 
SJR,Shaw Communications Cl B (Google  Yahoo  Earnings  Chart) 
SLB,Schlumberger Ltd (Google  Yahoo  Earnings  Chart) 
SPWR,SunPower Corp (Google  Yahoo  Earnings  Chart) 
SSL,Sasol Ltd Adr (Google  Yahoo  Earnings  Chart) 
STO,Statoil Asa (Google  Yahoo  Earnings  Chart) 
SU,Suncor Energy (Google  Yahoo  Earnings  Chart) 
TEF,Telefonica Sa (Google  Yahoo  Earnings  Chart) 
TKC,Turkcell Iletisim Hizmetleri ADS (Google  Yahoo  Earnings  Chart) 
TNE,Tele Norte Leste Partic (Google  Yahoo  Earnings  Chart) 
TSP,Telecom De Sao Paulo Sa (Google  Yahoo  Earnings  Chart) 
USM,U.S. Cellular Corp (Google  Yahoo  Earnings  Chart) 
VIP,Vimpel Communication Ads (Google  Yahoo  Earnings  Chart) 
VOD,Vodafone Group Plc (Google  Yahoo  Earnings  Chart) 
VRTX,Vertex Pharmaceuticals (Google  Yahoo  Earnings  Chart) 
WFT,Weatherford International Ltd (Google  Yahoo  Earnings  Chart) 
WYNN,Wynn Resorts Ltd (Google  Yahoo  Earnings  Chart) 
ZNH,China Southern Airlns Co (Google  Yahoo  Earnings  Chart) 


There are many reason for such a shift. The large caps have underperformed for some time so they are catching up. Most measures of valuation show under valuation for them. The weak dollar effect. Later stage of bull market favors large cap. Flight to safety and many other reasons. But currently large caps is where the mojo is.

Market Monitor

• A narrow range day with bullish and bearish breakouts more or less matching.
• The market has formed a range here. In spite of several negatives like mortgage problems, financial market dislocation , oil rising to 80 and s on the market has held on remarkably well. It is near its recent high.
  
• Option expiration will influence near term action.
  

Market timings and emotions

Toughest task for many traders is to do nothing. There is an old adage, there is time to be bullish and time to be bearish and time to do nothing. The time to do nothing is a function of your trading style, trading time frames, mental make up and risk preference.

In a hyper active environment created by mainstream media, financial media like CNBC, WSJ, and Bloomberg, snake oil salesmen and high frquency traders, markets each gyration is a temptation to act.

I am asked by many as to when the signal will turn green. Some have very short term trading horizon and hence days on which they make few dollars and find market going up , they question the logic of market timing. Some have volatility based system and do well in such time frames ( which also means they would be unprofitable during low volatility phases, which means most of the time in a year), and hence brag volatility is good.

Market timing systems are just mechanical systems, they have no emotions. If you look at the Investor's Business Daily market timing system, it is based on number of 1% plus days in 4-7 days. Now when that phenomenon happened sometime mid August lot of people had a emotional reaction. Many imputed motives to IBD calling end of the correction. They were just displaying their emotions and lack of perspective. All that the IBD system does is mathematically it looks at cluster of days. It has no control over when those days will happen.

Same way the Market Monitor is just maths, there is nothing that is going to change because someone wished for another reality.

William O'Neil had a very simple and basic advise in his book " 24 Essential Lessons for Investment Success" :

From your experience , what would you say are the essential steps to successful investing?
If you are an individual investor, whether new or experienced, and you want to make money and perform well investing in common stocks, there are just three key steps you must learn and follow:

• First you have to develop buying selection rules that let you pick the best stocks.
• Second you must have rules to take profit and avoid losses.
• and third you need specific method to tell you when the general market averages are topping and headed down, and when they've finally hit bottom and turned in to new uptrend. That's all you need.

Waiting for Fed

Market rallied after tow days of negative action. The Fed meeting next week is acting as a backdrop to market action. Market participants are pricing in Fed cut. The expectations of Fed cut are rising to such a feverish level that the actual news will be anticlimax and if market keeps rallying in to Fed day, we will be sold on actual Fed decision.

With holidays again lurking , we will be in thin and volatile trading environment.

Jitters and low volume

Market has settled down in to a predictable noisy and volatile phase. Eventually the move will resolve itself in either direction but at current stage day to day action is influenced by news flow and jitters.

Intel guidance and Apple Iphone numbers had the market opening strong yesterday, but sellers wasted no time in driving down the market till lunch. Dip buyers tried putting a rally together but by end of day it was a negative day on slightly lighter volume.

Market is in Fed watch mode. So this action will continue till then. It is tough place to be, you can b neither short aggressively or go long with confidence. Tactical plays or sideline is the best bet.

The Hunt for Black Monday

October 19, 1987, witnessed one of the biggest drop in the history of stocks market. It has been 20 years since that drop and Matthew Rees takes a detailed look at it for The American magazine.

On October 19, 1987, a bizarre and completely unprecedented set of events unfolded in America’s financial markets. In New York, the brokerage firm Donaldson, Lufkin & Jenrette posted uniformed security guards outside its office, fearing armed conflict with its clients. In San Francisco, a precious-metals and foreign-currency firm sold its entire stock of Krugerrands and American Eagle gold coins. At the New York Stock Exchange, executives of a Las Vegas company called Jackpot Enterprises tried to celebrate their new listing amid reports that floor traders were fainting.

For the preceding seven weeks, the stock market had been skidding. Now, on this sunny Monday, it was on the verge of total collapse. When the day was over, the Dow Jones Industrial Average had lost more than 500 points, or 22.6 percent of its value—the equivalent of a drop of about 3000 points today. A half-trillion dollars in wealth disappeared overnight—equivalent at the time to the entire gross domestic product of France. On the heels of the decline, a recession was considered a near certainty and a depression a distinct possibility. After all, on the worst previous day, October 28, 1929, the market had dropped just 13 percent. Now, 58 years later, a New York bar was serving a mixed drink of dark rum and black Sambuca called “Black Monday,” the same term applied to the previous crash.

The size and speed of the 1987 decline were breathtaking. So was the very fact that it happened: the U.S. economy was strong, and there had been no major destabilizing events. No terrorist attack, no presidential assassination, no failure of a major bank or brokerage firm. While there was apprehension, only a few analysts were predicting a major market downturn, and no one called a crash of this size.

Studies of Black Monday soon became a growth business, but none of them ever provided a convincing explanation of precisely why the market fell so far so quickly. Today, 20 years later, we don’t know much more about the causes of the crash than we did when it happened. Once again, we could be caught by surprise.

I decided to talk with some of the country’s leading market watchers, as well as with those who participated in the 1987 events, to see how their thinking has evolved over the past two decades. What was the explanation for Black Monday?

A must read for all market participants.

Sector Strength and Weakness

Market corrections lead to change in sector leadership. Tracking the sectors in top and bottom decile can give you an idea of sector trends.

Top Sectors

MG113,Agricultural Chemicals (Google Yahoo Earnings Chart)
MG125,Oil & Gas Equip & Services (Google Yahoo Earnings Chart)
MG130,-Metals & Mining- (Google Yahoo Earnings Chart)
MG131,Steel & Iron (Google Yahoo Earnings Chart)
MG132,Copper (Google Yahoo Earnings Chart)
MG133,Aluminum (Google Yahoo Earnings Chart)
MG137,Nonmetallic Mineral Mining (Google Yahoo Earnings Chart)
MG342,Farm Products (Google Yahoo Earnings Chart)
MG517,Diagnostic Substances (Google Yahoo Earnings Chart)
MG636,Heavy Construction (Google Yahoo Earnings Chart)
MG712,Resorts & Casinos (Google Yahoo Earnings Chart)
MG739,Catalog & Mail Order Houses (Google Yahoo Earnings Chart)
MG767,Education & Training Services (Google Yahoo Earnings Chart)
MG768,Technical Services (Google Yahoo Earnings Chart)
MG769,Research Services (Google Yahoo Earnings Chart)
MG810,-Computer Hardware- (Google Yahoo Earnings Chart)
MG811,Diversified Computer Systems (Google