The suspense in market continues. Neither side is making an aggressive move. So buying a bullish breakout or selling short a breakdown results in chop. If this is correction, it is yet to play itself out and too early to be bullish. If it is "the top", then it is too early to short. So enjoy the action and wait for the next move in this suspense movie.
The real revealing action in the market was in the oil complex. Playing the geopolitical poker is fun game as long as you don't act on your bluster. Like George Bush learnd it in Iraq, Putin is learning it in oil market. Threat of supply disruption works to your advantage as long as it is just threat, when you actualy do it, the oil prices go down not up. Once a market or commodity tops out it is very difficult to get it up and running again unless suficient time passes. Keep a close eye on XOM and other oil stocks. XOM is the 800 pound gorilla in this oil complex and in the portfolio of all mutual funds, when it starts sliding, it will be smooth well oiled move down. It will take other oil stocks along with it.
The other excitement yesterday was Apple. It had highest volume in one year. We will see where it goes from here. The products are going to hit the market six month down the line. So the overzealous reaction might have a sharp pullback before it goes up. But currently even the gradmas in Timbuktu are excited about Apple.
Watch the breakout list carefully, the defense sector and economicaly sensitive retailers are getting bid up. DLTR and NDN are going to lead market higher. Is their message in those moves. The suspense continues.
15 comments:
I think that as long as we see positive results in 3-4 sectors, relative results in 2-3 sectors, and it's only energy, materials, and utilities that are getting hammered, we have little chance at a general selloff.
I think that come churn at these levels, if prolonged, will do two things:
1 - point out to the astute what sectors to follow
2 – lead to another general bull run.
But what do I know?
Which sectors will lead is becoming much clearer day by day.
Which stocks will lead is also becoming more or less apparent.
Waiting for them to set up for low risk entry point from where they will rapidly move is the key.
Same is true of short side currently.
I'm curious, how segmented a manner do you look at the market? Custom segmentation, S&P sectors, the standard industry groups? I have a list of 28 that I use, most have ETFs but about 6 don't.
Do you pick the sectors by the stocks that come through, or do you pick the stocks based on the sectors that are moving?
I use the TC2007 industry groups. It has 239 groups. I also look at the IBD groups.
Basicaly when looking at groups one needs to look at shorter duration momentum indicators compared to individual stocks.
I derive group trends form stocks breaking out 5% or more on high volume plus stocks up 25% or more in 65 days. That is faster way to identify group trends than looking at sectors as many times few stocks break out first and then others follow.
Many times the ETFs are poor proxies for sectors because of the way they are constructed.
GS, MER, LEH all new highs but volume not that impressive...
But there were lot of other buy opportunities.
The underlying bid in the Nasdaq 100 continues.
MUCH finer segmentation than I have available. A limitation of my software, unless there is a quoted index or ETF tracking it, it is hard for me to segment the groups.
My decision to buy a stock is seldom driven by sector. It is just to understand markets I look at sector.
At individual stock level, you need a clear very large catalyst to move it in to next orbit. For most stock significant earnings or sales acceleration is most important catalyst.
Biotechs act differently.
Every other catalyst has a low probability of driving a rapid up move in compressed time frame.
From a broad standpoint, I think my current portfolio has representation in most of the moving sectors, except Biotech and Airlines. I am looking at the ETF for Biotech because I do not like the company risk associated with those stocks - it's too hard to manage risk! But, I would not mind allocating a portion of my capital to capture what seems will be a steady gain.
Airlines are now no more undiscovered, everyone loves them, how much upside is left in them I don't know. You get best results if you can find stocks very early in their price appreciation or earning acceleration or recovery cycle.
Find stocks early in price appreciation cycle. Find stocks early in earning acceleration cycle. Find undiscovered growth early. That is if you want real gang buster returns.
Yes, I ruled out the airlines long ago. Just mentioned them as an example of a currently moving sector.
I do think that Biotech just recently bottomed in relative performance and should have good gains.
Working on the explosiveness. Got a decent crop on the watchlist, I think. Some CANSLIM, some Zweig, some value.
Look at PRXI, earnings were last night. Stock has low float. Stock up 17% today. That is an example of explosiveness. The earning information was available last night itself, it offered good entry in the morning.
Generally speaking, I can't day trade or watch for entry during the day. I still have a job.
;-(
So I have to plan and trade around automated entries ... or train my wife ...
But I get the general idea. There are other opportunities, not quite as explosive, for slower trading, and I'm taking advantage of them as well.
It is not necessary to day trade earnings. I do not day trade. All my holdings are few weeks to many months. Earnings get announced either previous evening or early morning. The key really is to pick the 2-3 from that list which meet the criteria of significant acceleration of say 50% plus earning growth. Preferably it should be also quarter over quarter growth. Float should be low (below 25 milion preferable). No analyst. Low institutional holding.The stock should not be up majorly in last 65 days. Typical earning move last 4-6 weeks. The % moves are anywhere from 20% to 300% before next earnings. Like GROW, TRT, HSR which I have discussed previously.
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