Saturday, July 24, 2010

Weekly Sector Report | 07/23/10

The fatted and slumbering bears were rudely awakened last week.  The broad market was up 3.7% and the bulls reclaimed some hotly contested moving averages.  I've presented for you a chart book with weekly, daily charts for the 24 major sectors. You can find that HERE.  Additionally, I have all 148 Sector sorted by performance (and also alphabetically, so that you can find sectors more easily).

Let's take a look at the weekly performance chart (click to enlarge).

Health Care was the only negative sector.  Now let's turn to the Total Stock Market Index--Note that I look at this index rather than the S&P or the DOW because it is just that--the TOTAL index.  I like the bird's eye view (click to enlarge):

I mentioned last week that we were within a feral cat's whisker of these lines crossing on the weekly chart.  They have not crossed, and there was some upward progress. HOWEVER, the 13 week EMA is still pointing down, and the 34 week EMA is flat and has been pentrated.

The market continues to digest news daily, and its mood swings have run quite a gamut--dealing thwacks to bulls and bears alike.  To my eye, I'm seeing some constructive charts from our most recent swoon.  Nevertheless, whether you are a bull or a bear, vigilance rather than complacency must be embraced.

 I wish you good trading this week.  Keep your wits about you and remember the difference between bias and conviction generally is defined by dollars and time.  Always make sure you have a clear idea on how much you wish to pay and how long you want to wait.

Update: This week will be my LAST Weekly Sector Report. Why? FINVIZ offers a very easy and comprehensive view of the Sectors. I was looking at it this morning, and my simple conclusion was that my report was NO added value. Accordingly, I invite you to spend some time exploring FINVIZ's offerings. Start here.

Wednesday, July 21, 2010

The Emotions of Risk

One book that I frequently recommend is Justin Mamis' The Nature of Risk: Stock Market Survival and the Meaning of Life (1). I believe this book to be foundational to new traders because it discusses, what else?, the nature of risk in the market. What I love about Mamis' book is the unique way that he writes about market risk, and the way that he juxtaposes two seemingly opposing ideas, that are not in opposition at all. From that juxtaposition he illuminates. (Read on for an example). I wanted to do a brief post on some of his concepts from Chapter 6, The Emotions of Risk. I think that some will find some resonance. I particularly wanted to share some of these concepts that might engage your brain into thinking about risk differently. Mamis posits:

"Under pressure, emotions determine our action." (p. 72)

Because risk is typically defined as a peril, fear is one of the primary emotions. "Fear is long-term, an underlying pervasive emotion, like the underlying primary trend of a bear market. It doesn't go away until it changes." (p.73) Mamis makes a simple, yet powerful, statement about the pervasive fear needed for stocks to go up. Yes, you read go up. For there to be buyers, there must be sellers. And it is the fear of the sellers that creates the proverbial wall of worry to provide supply for those who have a different perception of current market risk. He also notes that the operative portion of fear is anxiety. Anxiety is what paralyzes and prevents you from taking action. It is this anxiety that "gets in the way of taking a risk."

The flip side of fear is the emotion of greed. The operative emotion of greed is envy. Mamis notes that ". . . whereas anxiety paralyzes, envy cause one to act. . . " It is difficult to see the spectacular trades/success of others, and not feel a small bite from that evil twin of jealousy, envy. Envy can cause very risk behavior which is simply, "the risk of 'denial of risk'." Both greed and anxiety often lead to doing the wrong thing. Inertia can be one of those 'wrong things': failing to buy when one should buy; failing to sell when one should sell.

These emotions and their operative manifestations into our action (or inaction) govern all market participants. The impetus for buyers/sellers is reversed in bear/bull markets. Regardless of the market participant regalia you dress in each day, it is best to understand both your own and others' motivations and perceptions of the current risk environment. Mamis' book came along for me when I was feeling 'inertia'--that inertia having been brought about by the overwhelming need to have more information, more certainty, more sense of direction. Granted, there is nothing wrong in standing aside when there is great murkiness...but my inertia was spanning a time when there was some market direction, AND my emotional state prevented my seeing that. Providence must have set this book into my hands, because it helped me come to terms with that inertia.

As market participants, we have to balance the two opposing points off view of being free enough to take risk and while not falling into the trap of 'the risk of 'denial of risk.' I'm not going to leave you with that concept in a void. How does one find the right action in that balance?
We need, we crave, the trust and belief from others, but when information is insufficient we need trust and belief in ourselves. We need the discipline to accept whatever is available, and the experience to understand all the ifs, ands, and buts, and yet still take the risk: we need to be able to make the decision. (p. 79).

As with most things, the right-rootedness of these important concepts is discipline. My distillation is that we need discipline first to ensure that our trading/investing capital lasts long enough to give us the experience that we need to build mastery. Without experience, we cannot build mastery. It is mastery that produces intuition and insight, and those ultimately support our confidence. Mamis notes:
Discipline means choosing what to do unencumbered by the fear of making a mistake. Confidence means trusting our intuition and that what we 'see' is what we "know." (p. 80)

He closes his chapter with a question that I hope that all of you embrace as your own mantra for coming to terms with this concept of risk: "How do we create within ourselves the heroic condition of confidence wherein risk is not a danger but life?" (p. 80) I also implore (v. suggest) you to get this book. I promise you that it will make you think of and about risk in a way that you may not have considered previously. I particularly recommend it for any who are feeling inertia and feeling compelled to have more information, more certainty, more (this, that, the other) before forging ahead and making a decision.

(1) Mamis, Justin The Nature of Risk: Stock Market Survival & the Meaning of Life. Flint Hill, VA: Fraser Publishing, 1999

Sunday, July 18, 2010

Notes from my life

What a great week!

On Thursday, I ventured back up to Palladio with two of my friends (28 years!) to celebrate our collective 50th birthdays.

We met at KPMG Peat Marwick, fresh out of college. How could it be so long ago?! We had a leisurely lunch, and were reminded that friendships, like wine, get better with age and that good food and conversation naturally are the most successful pairs trade of all!  The restaurant made our desserts extra special.  Here is my blueberry tartlet in a coconuts tart shell.

I need to work on that flash shadow!  I elected to forgo the wine pairing.  Interesting economics:  We could have ordered wine pairings (4 glasses each) for $12 more ($36).  Rather, we elected to go with 1 glass of wine (Viognier), and asked them to leave the bottle ($44)--which would give us each about 1.5 glasses each.  It would have been smarter to get the pairings and just not drink very much!  $3 v. $10 per glass...oh well!  (I'm disgusted that I did this math; but you don't want me splitting the bill, because I cannot do a thing in my head).

♠ ♠ ♠ ♠ 

My father found a quartet of kittens at his back doorstep. "No!", was my answer when he called and asked if I wanted them. He managed to trap 3 of them in a live trap and took them to the local shelter. On Friday, I tried unsuccessfully to get the 4th one. This little kitten clearly wanted to come to me, but was frightened. Without his brethren, he was both small and utterly alone in the world.

Ask me why I know it is a 'he'.  I now have another kitty. I'll post a pic once I get a good one.  He's on day two in Leisa-land.  I'm keeping him in a large crate with a smaller crate inside.  He has a cat box, food and water.  He is white with a black mask and egg-shaped black splotches.  I'm naming him Malcolm.  Why?  He has a perfect black  'x' on his pink nose.  Every rib and vertebrae can be felt, but his coat is in good shape and his eyes are clear. I will take him to the vet next week.  He's had enough trauma.

He's very friendly, but scared of every noise he hears which is strange to him (and all noises are strange to him).  At least today he will run and then come back out of his hiding place.  He did not do that yesterday and my son and I had to force him out with a broom from behind a bookcase.  My son nabbed him.

He met Ella last night.  She's a calm and gentle dog, and loves both Minnah and Wyatt, my current two cats. They are acting weird, as cats do.  I'm managing introductions carefully.

Here's a pic I just snapped:

Saturday, July 17, 2010

Weekly Sector Report | 07/16/10

Although the broad market was down 1.3%,  a couple of sectors still managed to hang onto weekly gains:  Automobiles and Parts and Technology.  Also, 18% of the 148 sectors managed to have gains for the week.
As is usual, I have created a PDF for you which you can download here.

I want to share with you a chart of the $DWCF (Stockcharts symbol), the DJ Total Stock Market Index.  This is the index that I  use to show the relative performance in the sectors.  I use this rather than the $DJUS (Stockcharts symbol) because it has volume information.

Let's take a look at the chart before I start yammering about it:

I have 13/34 week exponential moving averages (EMA's) on this chart.  I have noted for you with the purple arrows the crossovers.

I am still of the mind that the market is at an important crossroads. This week, the market was psychologically bludgeoned by (1) evidence of deflationary forces on the market through wholesale prices decline; (2) the Fed's report did not inspire confidence [Would they really tell us if they expected a double dip recession?  No.]; (3) consumer sentiment lower; and (4) declining Philly manufacturing index.

I'm practicing equanimity with respect to this market.  It has managed to surprise and befuddle many, and I expect it to not veer from that MO as earnings season continues to unfold.

I wish you good trading next week.

Edit:  I should have noted given that the chart is not so clear that we are within a feral cat's whisker (ask me why I used that!) of crossing on the weekly:  11276.13 (13) v. 11274.58 (34)

Saturday, July 10, 2010

Weekly Sector Update | 07/09/10

(Click to make larger)

After two bleak weeks for bulls and fatted salmon for bears, the markets reversed with impunity last week.  Not only were the 24 sectors above positive, but there was nary a negative sector in the 148 subsectors.  As is usual, I prepared a sector report for you.  You may download the PDF here.

I also created for you (from FINVIZ data) the short float change from 06/25/10 to 07/09/10.  It is included in the weekly sector report, and it has a primary sort on highest short interest to lowest by the sectors used by FINVIZ.

To give you some teaser information, here are the top/bottom 10 in short interest by industry:

(Click to make larger)

With quarter end behind us and earnings season upon us, actual v. expected earnings surprises combined with guidance for the balance of the year are likely to be critical to sustaining the current move down or reversing.  We are witnessing an epic bull/bear battle at these lines. I wished I could tell you who was going to win.

I wish you good trading next week.

Tuesday, July 06, 2010

Time Frames

I want to highlight in a brief post, using FNSR as an example, the importance of looking at multiple time frames when stalking a stock of our choice. I was looking through the "Networking and Communication Devices" sector. I noted that FNSR had not broken down much, and it has a whopping short interest of more than 20%.

Here's the first chart that I pulled:

Looks a little toppy, does it? I decided to step back and view a longer term chart using a weekly format. Weekly charts are my favorite time frame to scan for attractive set ups. Here's the weekly chart:

This is a very attractive looking chart, to my eye.  I'm going to posit (v. predict!) that if it breaks that volume bar, it is going to singe badly the large bearish position.  With the whacky market last week, let's take a look at the 60 minute:

I would watch the box where it bounced.

This stock has lots of institutional sponsorship.  If you've stock voyeur proclivities, you might find this website interesting

I use this quite a bit to poke around.  It is free, but you have to register.  I find it to be one of the easiest to use to look at what big money (I didn't say smart money!) is doing.  They have a premium product, but I do not use it.  It also notes for stocks what rank it is in the institutional portfolio.

Position:  None, but I would consider a long here.

Monday, July 05, 2010

Weekly Sector Update | 07/02/10

Look familiar?  For the second week in a row, all of the equity sectors were red.  The broad market was down 5.59% an as you can see from the graph above, there was quite a bit of variability.  Of the 148 sub-sectors there were only 3 positive sectors--last week there were 5.  Ugly.

As is usual, I prepared for you a pdf report that you can find here.

Let's take a very broad view.  Here's the Total Stock Market Index.

I included the time period from 03/09 through current because I want you to see the concentration of volume by price.  As you can see, we are at a very critical juncture. 

Keep your wits and your discipline about you. 

I wish you good trading this shortened week.

Saturday, July 03, 2010

Notes from My Life: Canoeing on the Upper James

On Thursday, I closed out most of my short positions.  My rationalization is that I had entered them at a very good price, and I had not closed them up fearing a ramp into to either month end/quarter end/first day of the month. With an important number coming out, I did not want to rely on stops and have a gap up.

My husband and I spent a very pleasant day on the Upper James River, and I want to share a bit of that day with you.  Our goal was to put in at Howardsville and float down to Scottsville.  My husband was going to fish for small bass fish, and he had two rods to support his efforts.  I planned only to paddle to allow him to fish.  I'm not expert with the paddle, but good enough to keep us out of the bad stuff and to maneuver to the "fishy-looking" places.

We went to James River Rafters at Scottsville to shuttle us to their Howardsville private launch. We left our home at 6 a.m. for the 2 hour drive to Scottsville.  Checked in, handed over our $35.  We were shuttled to Howardsville, just a few minutes up the road. Our driver was a very polite, customer-oriented young man who was a native of the area.  When we arrived to the entrance, the farm gate was padlocked (as expected). The key was not in its place (UNEXPECTED).

As women know, men will not be thwarted when a sport as seductive as fishing is involved.  My husband suggests that we put in at the James River Wildlife Management Area (WMA).  Our guide agrees that it will only add 2 miles to our trip.  I'm ignorant of any of it (why didn't I have a map with me?), and I'm game for a couple of more miles.  I asked our guide when they closed, and he said 6 p.m.  I said, "If we are not off the river by 6 p.m. you will have to come looking for us!"

We put in at the WMA, pictured at left.  We are blessed in Virginia to have some very beautifully maintained WMA's that provide public access to many of our beautiful lakes, rivers, beach and mountain areas.  There is also one in Howardsville, but that is undergoing maintenance and is temporarily closed.

Our day was perfect:  high of 82, mostly sunny, no humidity.  We had sunscreen, camera, hats, water, Gatorade and lunch. This area of the river is very remote. The river is gentle here, and just a few places where it has any energy (and the river makes the noise of a heavy rain), and they are easily navigable by an amateur such as myself.    Large farms, dense, old woods border most of the river.  The train tracks run parallel to the north side of the river. (I just caught the engine through the little clearing that you can see on the full size picture.) There is little human activity heard. Crows announce to their river brethren that you've been spotted. Ducks are startled by your presence and fly across the river.  A majestic bald eagle is non-plussed by our presence and magnificent in its flight.

Cell phones are spotty, so I was able to see a few messages.  Call reception was non-existent. But I was getting periodic messages.  I did check the market a couple of times when reception allowed.  We had our GPS, which is very helpful on the water.  After what seemed like a long time without seeing the bridge at Howardsville, I asked Mark how far we had been.  Three miles.  Well that was 50% further than the two miles I was expecting. It would be just around the corner.  No, the next corner.  Nope.   We began to actively paddle.

Our line in the sand was 6 p.m..  At that time our vehicle would be inaccessible as no arrangement was made for our keys other than being housed in the office. Mark kept saying,  "The bridge should be just around the corner."  After five MORE miles, 3 fish and more bends, there was no bridge.  I now realize that I have become an unwitting victim of the utter inability of men to parse fact from fancy on the size/distance of anything. Since it was 11:45 (2.75 hours), and we still had not made siting of Howardsville, we had gone 8 miles (and my shoulders feel every mile this a.m.), it was clear that there was no way we could make Scottsville by 6 p.m. as it was a 6 hour float from Howardsville--still not in sight!

Just before noon, we tried to call the office. Mark called twice, and while the call went through there was no reception. The other end could not hear.  I tried on my phone.  I couldn't get through.  We continue to paddle determinedly.  I had the bright idea of sending a text message which did not require on voice clarity to my daughter.  I asked her to call and relay that we would be late and text back that she received message.  I did not fill in all the details...I'm texting; I'm steering the canoe (not well during texting); and I'm trying to beat the signal death that was surely coming.  Just the facts.  "Call ______ at ______.  Tell them we cannot be there by 6 p.m. and leave keys in ___"

I'll have to deal with the company how my daughter was treated, but the end result (which I learned upon returning and speaking with her) was that she was told that (1) they could not verify who she was; (2) they were not going to do anything with our keys; and (3) text your mother back that she had to paddle faster and get back at 6 p.m..  (Their actions completely vindicated them from this poor exchange).  She texted back that they could do nothing with keys because they could not verify who she was and the imperative that we had to arrive back by six.

Shortly after I had texted my daughter, and before I had read that she received my message, I had 3 bars on my phone--an oasis in the desert of reception. I called the office.  The woman said, "Our driver came back and said that he had made a terrible mistake (mistaking 10 miles for 2)."  I said, "That's okay.  We'll just do this, and just leave the keys ___.  My daughter will also be trying to call you."  Nothing else was relayed.

About 1 p.m. we see two guys on the south side of the river.  They were looking at us, and were in a odd place. I shouted, "Hey, there!"  One shouted, "Where do you want to get out at?"  I thought, "Oh shit! Who are these guys?"  While we were too far away to see, it was our driver with another young man.  They had driven our truck and another vehicle to the Howardsville landing.  They then paddled UP river to catch us before the landing (otherwise we would have passed the landing) to see if we wanted to take out there.

 He said that on the way back he realized that he had made a terrible mistake. He was very apologetic--but frankly both he and Mark  were complicit in underestimating the distance on that section of the river!  Apparently both were thinking of Wyngina to WMA which s about 2 miles. We ultimately decided that another 8 miles  would be a bit much. Our contrite driver helped steer us to that decision too, understanding how far we had been and where we needed to go. He was a very nice young man, and we appreciated the time and effort they undertook to right a  mistake.

Because we were so focused on managing the outcome, we hadn't realized how much energy we had expended (paddling actively v. floating/steering) to get to that point. While we may have made a leisurely passage down the balance of the river to Scottsville, it would be at the hottest part of the day, and we still would have had to drive 2 hours home.  There are a few energetic places in the water.  Being exhausted--both mentally and physically-- while navigating stuff like that is dangerous.

Discretion IS the better part of valor--and we had nothing to prove.  Here's our trip map.

We put in at A; took out at B.  With crossing the river a few times, the GPS recorded 10.7 miles of distance.  My arms/shoulder feel every mile of that!. On our drive back and during the evening, we exclaimed, "Thank goodness we did not paddle down to Scottsville". We had a beautiful trip (adventure) over a beautiful section of the river.  Mark had caught some fish, refined his casting with is new set up, and we both had a grand adventure.  Plus, any day that you see a bald eagle is a good day.