Sunday, December 26, 2010

Winter Wonderland

The snow is still coming down.  Always a special type of quiet.  The dogs went out for a romp.  How they love the snow.    Bird feeders make good (though unintentional) sport for bird dogs.  I finally had to bring Daisey in.  She had ice balls on her feet, sides and her legs.

The birds are a bit frantic.  We have grackles (or blackbirds, I cannot tell which) that have come in in droves. They are not molesting the other birds, so everyone has something to eat.   Daisey was making the rounds to the three feeders, yipping and having a big time.  The feeders are far enough apart and she makes enough noise that the birds eat just fine. We have juncos, tufted tit mice, mourning doves, purple finches, gold finches (though not gold yet), cardinals, downey woodpeckers, and nut hatches.  However, once she hunkered down in the snow at one feeder, it was time for her to be herded inside.  She and the birds needed a break.

I needed a break too. It is cold out.  I shoveled the sidewalk this morning.  Mark was out with the snow plow on the Wheelhorse.  He's been working on that a couple of days, so it was good to give it a maiden run.  I cleaned the vehicles off.  With holiday prep, I'm severely off my exercise regimen.  Tromping through the snow, shoveling and sweeping was good energy expenditure.  With all the holiday meals and temptations (that I've not bothered to resist), my energy cup energy expenditure is a good thing.

Weekly Sector Report | 12/25/10

Santa has not dispensed many lumps of coal for the market--however short sellers in strong industries are likely dragging a heavy sack.  Last week the broad market index ($DWCF on Stockcharts) when up 1.06%.  Here is the chart (click all images to make larger):

Let's take a look under the market hood and see how the broad sectors performed:

Now for a look at a drill down of the top/bottom 10 performers:

I have created a chart book for you.  You can download it here  (8.5mb).

Friday, December 24, 2010

Almond Toffee and Stock Picking

We have pretty simple Christmas's in Leisa-land.  None of us needs anything; none that we know need anything; and plenty of people who we don't know have great needs.  We like to focus on the latter group.  However, for the people we know and love, I like to give a gift from the kitchen.  In past years it has been a cycle of  cinnamon rolls for Christmas morning, cookies, or homemade candy.

At a nearby salvage store, I stumbled upon some terrific items.  I don't go there very often, but I elected to take a peek before going on a foraging mission to other stores.  My, my, my!  First, I found a 10 3/4" ScanPan.  I picked it up and said, "Wow, what a great pan!"  It had a $20 price tag on it.  I bought one.  They also had some great 2 qt Rubbermaid food service containers.  My idea, then, germinated from seeing this great deal on these containers (2 for $3.99--they are @ for $12-13 at Sam's).  They are fabulous in the kitchen.  I decided that I would use these utilitarian containers to house almond toffee.  I also found some other wonderful things to assemble as a great gift bag.

Upon returning home, I Googled the ScanPan.  The cheapest I found it was for $132.  I went back the next day and bought the remaining 5 pans.  Such a deal!  One goes to a trading friend, one to my Stepmom/Dad, one to my sister, one to a neighbor, and then an extra one.  It is one of the finest  fry pans I have used--and the coating is ceramic titanium, not Teflon. Beautiful balance and superior cooking performance--though non-stick, it sears! I may just KEEP the extra one.

Now to my candy making saga.....   It has been quite a long time since I have made candy. Like most baking endeavors, 'stuff' needs to be precise--most particularly method and temperature.  I should have known that a recipe that said "You don't need a candy thermometer; the almonds will tell you when your toffee is ready, because the skins will pop."   Cranberries do that, so I didn't suspect these instructions.  After two failed batches, I not only suspected, but I indicted the recipe, sent it to jail and threw away the key.

Clearly I was in need of a time out to reflect and to research.  Like most things that you are researching on the internet (cooking, stock picking, who to marry, when to plant tomatoes) there are many, many ways to approach your objective with a thread of universality.  Even temperature so as to not 'shock' the mixture (which causes the butter/sugar to separate) and do not attempt on a humid day seemed to be two important threads.  Most importantly, these were the two things that I could pinpoint as problematic and this was confirmed by my abysmal success to failure ratio of 1:2.  Was it more humid than I thought?  or was I just a toffee-making dunce?  Likely a bit of both.

For a couple of failed attempts, I was able to grind the failure into the most decadent ice cream/cereal topper you can imagine.  You CAN make a silk purse out of a sow's ear it seems.  There were two batches that literally just had to be thrown away--but one of those could have been ground up.  I was too desolate with my back-to-back failures to be creative at that point.  One of my failures included leaving out 1 whole cup of sugar.  Funny thing, it still turned out great, just not as dense. Anyway, the cost of my ingredients in my failures were still less than had I taken a cooking class.  (Rationalization is a great thing!). 

I have MacGyver-like tendencies.  Because temperature is so important, and most candy thermometers are clunky and hard to read (plus mine will not clip to my pot side), I used my digital thermometer--the one with the probe and the snaky metal.  If you don't have one, you should!  To keep it fastened to the pan, I have a nifty Trudeau spoon clip that was gifted to me last Christmas.

There is quite a bit of stirring required in making this toffee.  A wooden spoon yields a mean blister to hands unused to such work (mine!).  The probe needs to be out of the stirring thoroughfare. This little clip held the probe in just the right place.  I wrapped the lead wire a couple of times around the top to keep it snug against the pan and at the right depth and connected it to the body.  I placed the body in a small glass bowl so I could easily see the read out.   A nice little gift for the cook in your life.

I melted a mix of Valrhona milk and Guanaja bittersweet chocolate feves and then brushed them over the surface with a silicon brush.  Just a very thin layer to not compete with the toffee.  I took a picture of it for you.  Interested in the recipe, I succeeded with?  You can find it here.

So happily, I've compiled a bag of needful things:  spicy brown mustard, Pompeian Red Wine Vinegar, Indalo Extra Virgin Olive oil, Chinese Detox Tea, Praline Topper, and Almond Toffee and a 2 qt Rubbermaid refrigerator box.   A very nice combination of things that will nurture the body! I made gift tags from my souped-up Santa picture of Lucy! It is nice to remember this special girl who will be gone 4 years this January.

The best gift is to give something of yourself to another:  time, love, compassion--and a helping hand when needed to those in need. We did all of those things, to include helping my daughter sponsor a family at her school in great need.

This is my tree with Wyatt underneath from last year. Because of my many failures at Almond Toffee (but those failures were overcome!), this might be the only tree I see!

I wish you the best for the Holidays and for the New Year.

P. S......What does any of this have to do with Stock Picking?!  Read, research, do, fail, reflect. . . rinse and repeat. . . read,  research, do, cut your losses, take a sow's ear, make a silk purse, build your skills, build your confidence, use the right tools, improvise when you have to, and above all.......don't burn yourself.

There truly is nothing new under the sun, and the same threads run through all of our endeavors--no matter what we do.

Sunday, December 19, 2010

Weekly Sector Report | 12/17/10*

The total stock market index ($DWCF on advanced .33%.  Beneath the surface there was much activity in the sectors.  Here's the weekly graph (click all images to make larger):

Financial services had a lousy weekly largely due to V and MA getting their legs cut out from under them with the proposed regulations on capping debit card fees.  To get a view of the magnitude of the market's response on these two charts click here.

The WSJ Industry page as a great snapshot of the best/worst performing industries.  Here's the snapshot for this week:

You can choose from multiple time frames to see this type of performance.  These types of relative looks will help build a mental map for you to gauge market action. Click here to see how this easy visual tool works.

I had a reader ask me a question about being able to find low-risk entry points using these sector reports.  There are a number of FREE on-line tools to aid the individual investor who wants to do his/her own research. Ultimately we want to be in the industries that are attracting money relative to other industries, and be in the strongest performing stocks (attracting money relative to its sector siblings).  By clicking on any of the industry links, you can also see a snapshot of the strongest performing stocks in that sector.  (You can also do this easily in FINVIZ by clicking here. )

As steel was a great performing industry this past week, I wanted to share a couple of charts, the weekly and the daily, with you.

WEEKLY Steel Chart

Daily Steel Chart 

On both the weekly and the daily chart, steel has been breaking out and then pulling back to consolidate in a strong confluence of moving averages.   Interested in seeing who's on the homecoming court at the steel sector dance?  You can do so by clicking here.  There are a number of ways to find strong stocks, this just happens to be my way which appeals to my DNA and contributes to my understanding of the overall market.

Time to pull back out for the bigger pictureLet's take a look at the total market index:

We are fast approaching a volume bar (see dotted line) that should we surpass it, the gravity of volume overhang will dissipate.  What is interesting to me is that we often come to these important technical junctures that are coincidental with important news junctures--the next big news cycle being 4th quarter earnings and of course the report from the retail sales.

I have a good friend that reminds me, "There are no coincidences."

I have prepared for you a chart book with the weekly and daily sector charts.  You can find it here. It is a large file, so be patient with the download.

Tuesday, December 14, 2010

Perplexed? Flummoxed! Creating a No Dithering Zone

You can tell by the title this is going to be a mish-mash post!

I was thinking over the weekend how far I have come in understanding the markets better.  I have put in quite a bit of seat time and have paid a handsome tuition (sometimes repeating a class) to learn the market's lessons. I'm still learning, and my tuition is much cheaper!  I was pondering about whether or not I had actually outgrown the name of my blog (a notion quickly dispelled this weekend in looking at my chart books!).  

First, an aside.  Beginning this endeavor to understand the markets has taken me down the road that started with being unconsciously incompetent.  While unconscious incompetence in driving can cause great harm to one's body, such a state in undertaking the markets can cause a little corporeal damage to the portfolio.

There is a terrific article at Market Masters (and other great stuff worth reading) that talks about the 4 stages of competence from a trading perspective.  
  1. Unconscious Incompetence
  2. Conscious Incompetence
  3. Conscious Competence
  4. Unconscious Competence

I think I'm a 2.75 on that scale.  Over the weekend, I was reminded how aptly named my blog is.  As I was going through my detailed subsector report, I found a bushel of sectors above their pre-crash highs:
  • Apparel makers
  • Clothing and accessories
  • Broad line retailers
  • Commercial vehicles and trucks
  • Computer hardware
  • Electronic equipment
  • FOOTWEAR!!!!
  • Industrial Engineering, machinery, suppliers, transportation (4 sectors)
  • Personal goods
  • Railroads
  • Restaurants and bars
  • Specialty chemicals
  • Specialty retailers
  • Tobacco
  • Travel and Leisure
  • Trucking
  • Tourism
  • Trucking
  • Waste disposal
To say that I'm flummoxed as to why there are so many retail sectors and industrial sectors is an understatement. (As I write the BBY has missed).  The list is 22 of 147 subsectors (remember that folks slice/dice things differently!)  I use the Dow Jones sectors from Stock Charts that closely approximates the WSJ's industry page.

Besides finding a way to complain while giving you that list of sectors, that project of sitting down on Sunday by the fire with my book of charts reminded me of another important lesson.  (Can you tell I'm in a reflective mood?).  Naturally I have to yammer a bit before stating the lesson.

In 2009, the day after Thanksgiving, I elected to do a sector study of gold miners.  I spent the entire day looking at charts and profiles of miners.  I believed that they had bottomed.  What did I do?  I dithered.  I've come to believe that nothing is more dangerous than dithering.  I'll devote an entire post to dithering, so I'll spare you having to trudge through more words on this. But there are a couple of points to close with:

  • The charts DO tell us what the price action is over time.  And the sectors' price action in relation to others tell us where money is going. Our job is ultimately to put our money in places where it will increase.
  • Price action is neither valid or invalid relative to our opinion about it--it just is.  We either choose to cultivate habits that (1) allow us to discover such price action (our research) and (2) act in accordance with the evidential matter, or we choose to dither.
    • Dithering is not a helpful trait.  We must remember that the market will not pay us for NOT taking a risk.  Seeing constructive price and volume action and responding by dithering because (1) the action is not in accord with our opinion, and/or (2) we want more information, more certainty, more people supporting our decision means that we've given up opportunity for 'certainty'.  In fact, that means that we have increased the risk in our position as whatever news we were waiting for is also commonly known and likely priced in.
So being perplexed, or worse, flummoxed, are only bad things when those emotions are allowed to occlude our powers of observation or promote a continuing state of inertia--either to buy OR to sell. Every year I get a little bit better at holding these emotions in abeyance.  The blog name must stick--and it is never good to wander too far from one's roots.

I want to close with a quote from George Soros that I keep under my "Wisdom" tab.  It is something worth remembering when what we 'know' v. what we 'see' are at odds.

“Economic history is a never-ending series of
episodes based on falsehoods and lies, not truths. It represents the
path to big money. The object is to recognize the trend whose premise
is false, ride that trend, and step off before it is discredited."

Monday, December 13, 2010

Volatility Squeeze Candidate: PDO

Wandering around in the charts, I found this set up on PDO.  First a chart (click to enlarge), then some bullet points:

What I like about the chart:
  • volatility is very, very narrow. The stock is gearing up to make a move
  • ULT is moving up; that suggests to me that the move will be up.
  • Significant volume @ price bar where price has been accumulating.
  • Some constructive volume over time.
What I don't like about the chart:
  • Very, very thin volume.  However, that can be a boon for this type of set up.  Volume will need to come in to make this stock move.
  • Bad news could make this stock fall out of bed.
What I like about the financial profile(1):

  • Very strong balance sheet
  • Profitable, but goosed with gain from an asset sale.

(1) I don't do in depth financial reviews; very cursory.  This trade is primarily a speculative technical trade.

Position:  I entered a long position @ 4.72 today.

Sunday, December 12, 2010

Weekly Sector Report | 12/10/10

I've been featuring this chart weekly to allow a more 'bird's eye view of the broader market--not just S&P, not just the Dow, not just the NYSE and not just the Nasdaq (Click on all images to make larger).

I highlighted the prominent volume bars.  To my eye, there is some resistance ahead.  But the indexes are made of sectors and sectors of stocks.  As I was reminded in re-reading Mamis's "When to Sell", he notes that at any point in time 1/3 of the stocks are moving up, 1/3 moving down and 1/3 are in a sideways pattern.

A little sector rotation can keep the indices in a range, while several sectors can be flip-flopping about. Nevertheless, it is useful to keep the forest in mind while walking through the trees (and trying to avoid the things that slither about and bite us should we not be looking).  Let's take a look at the broad sectors:

The financial services industries have performed very well.  Banks are still borrowing s-t for next to nothing, and a rise in long term interest rates creates more net interest gains for them. TBT, the double short on TLT, has had impressive gains.  (I've traded in and out of in and I'm currently out).  Perhaps the rotation is out of bonds and into financials?  It is a trade that would make some sense and the charts seem to be showing that.

The Wall Street Journal's Industry page is a great place to look at comparative performance among sectors.  You can find that page by clicking here.  It is a public page, so you shouldn't need a subscription.  If I'm wrong about that, please give me some feedback.  Here's a clip from the YTD performance of the financials:

(source WSJ Industry page)

Of the 17.49% increase YTD experienced by Full line Insurance, almost 1/2 of it came from this week alone.  If you are doing some holiday stock shopping, there are many beaten down stocks in those sectors that might warrant a closer look for your investing/trading style.

For this week's chart book, I've elected to create for you an expanded book that includes WEEKLY charts of all of the subsectors (147).  Why?  Because I was looking at these myself, and I was very interested in seeing where each of the sectors were in relation to pre-crash highs.  It is interesting to see several sectors have surpassed that level.   You can access the report  here  .  It is a large download suitable only for fast connections.  I'm including an abbreviated report (without those schedules) here.

Monday, December 06, 2010

Weekly Sector Report | 12/03/10

Last week was a week for the bulls as they managed gains in all sectors. The broad market index was up 2.9%. Here's a look at the weekly sectors at a glance (click on all images to enlarge)

The total stock market index has been flat over the last 4 weeks.  It is both overbought, and it is approaching levels that will have technical and fundamental analysts doing some head scratching.

I'm also including a chart of the $NYA with the advance minus decline 10 day moving average.  It is still pointing upward.  This last advance is with fewer (ema of 400 net new highs) than the last advance (ema of 670 new highs) in early November.

I've created a chart book for you.  As the end of the month was during the week, it includes monthly charts.  It is a large pdf, so please be patient with the download.