The Perplexed Investor

SPY Chart | 11/02/11

2011-11-02T09:18:00.002-04:00

Above is a 60 minute SPY chart with a volume@price overlay. As I've never shaken my belief that charts tell us nothing so fully accurate as price history, I do look at where the market has voted with its collective wallet. It is these places where the inextricable psychological and economic investment shows up--and where breaches of these areas (to the upside or the downside) are likely to elicit a reaction (buy to catch up or Neither pundits nor technical analysis have any dibs on future certitude of market direction. Since my last post, the market seems to be reacting to its current (in)digestion of news out of Europe.

Euphoric, despondent and incredulous are all apt emotions that the market has experienced. Who knows what it will bring today? We are entering a area of important price support (to my eye anyway). Likely to be more chopping as market participants try to digest the Euro stuff and the MF Global debacle. And the MF Global evaporation is a reminder that the so-called smart money, is not so smart (said with schadenfreudic sarcasm).

Deja vu

2011-09-19T09:59:00.001-04:00

The market these days is reminiscent of the pre-Lehman/Bear Stearns market. The markets were hyper-reactive---with maniacal swings up and down. As I had done so much research and understood the factual underpinnings of the events (before they unfolded so dramatically), I was able to evaluate statements made by various talking heads. I was not assured by assurances.

Rather, I understood clearly the systemic risk potential before anyone was talking about it. I had invested hundreds of hours of personal research to understand the unfolding risks. I read financial statements (of mortgage insurers, insurance companies, mortgage companies and the investment banks) and saw the loan loss reserve and derivative language which told me that using historical methodologies in the sans-sane underwriting environment was going to lead to sharp losses. I read the S&P, Fitch and Moody's reports which FGIC published on their site. They no longer do. Most importantly, I understood that systemic risk would collapse all asset classes--there is no basket of diversification that would be safe. And as we soon found out, even some safe classes--money markets--were not safe.

This research made my head hurt. The only industry I had a passing acquaintance with was the mortgage industry and that was from audit experience very long ago. I found the investment bank financial footnotes overwhelming. But I read them. I thought the insurance companies would be at risk because of the amount of fixed income securities they bought. Turns out that I was right. I saw no analyst or talking head suggest that this was a sector that would suffer.
Sure, many were talking about the dangers of derivatives and agressive lending, but all of the doom and gloom centered on a symptom of the problem, subprime. Rather the entire housing industry that was in a bubble due to easy money for all--just not subprimers. A few hours at the OFEO site and reviewing their statistical reports for average earnings of households to average home prices and a 2 minute calculation indicated to me that the problem was sorely underestimated.

The new designer mortgages were not to get undocumented folks into homes, but to get "normal" households into homes where the home values as a multiple of household income had increased markedly (39%). From 2000 to 2006 housing values increased 76% while household income increased 27%. It is worth noting that home values increased even more post 2006--but my research was in 2007, and there is no need to update it.

Now, fast forward. We are awaiting another clown-sized shoe to drop in the form of the European 'stuff' and in the form of no new jobs creation for the US and the threat of a a continuing (or new) recession. Hard to know if it has dropped already or if we are just cowering in its shadow as it hovers above. My only surprise is that it has taken this long for the giant festering pustule of the Euro-centric economic mess to finally pop. Similar to our own issues in 2007. The demise of the banking industry was long foretold in 2006 and so. It takes a while for these whispered, muted fears to take on gut grabbing terror. However, today, I do not feel buoyed by the certainty of my research. I do not profess to understand the intricacies of what is going on in Europe.

There is a great paper called Irrational Optimism (Dimson, Elroy, Marsh, Paul and Staunton, Mike, Irrational Optimism (December 2003). LBS Institute of Finance and Accounting Working Paper No. IFA397. Available at SSRN: http://ssrn.com/abstract=476981 or doi:10.2139/ssrn.476981). It is worth your taking time to read. Here is the first paragraph from the abstract:

We address the tendency of many investors to overestimate the rewards and underestimate the risks of investing in stocks over the long term - that is, investors' irrational optimism. In particular, we examine the widely held belief that stocks are a "safe" investment for the long run. The probability of experiencing a real loss on equities depends on the expected real return and standard deviation of stocks. Judgments about the future magnitude of these two parameters typically involve extrapolating from history. We use a global database of real equity returns from 16 countries during the 103-year period from 1900 through 2002 to confront the optimism of investors with the reality of history

While I feel somewhat ill-equipped to know with any certainty of what is down the road, I do know that ultimately we have to rely on our own judgments of the risks. Dimson etal's paper is one that helps illuminate perceptions, and I try to keep the valuable perspectives in that paper at hand. If we could learn anything from the last bout of certitudes where the eventualities of the collapse of the dollar and treasuries were 'no-brainers', we should learn this: conventional wisdom in unconventional times is not worth much.

On Forecasting Economies, Markets and Hurricanes and the Democratization of Blather

2011-08-30T09:21:00.000-04:00

I am seeing many critics now stepping out with their perennial second guessing (at best) and ridiculing (at worst) Irene's denouement landfall. Though only a schadenfreudically disappointing CAT 1 hurricane, I'm here to tell you that being in the purple wind bands for a sustained period of time is no fun. Having your entire county's power grid knocked out is even less fun. A 150 year old red oak or beech tree is a powerful force when it comes crashing down on your home, car, or body.

Waiting until there was certitude about the storm's intensity and the when/where it would make landfall means that you are too late if you've underestimated. When dealing with catastrophic losses of life/property, the error that should be made is on the side of overestimating, not underestimating, the magnitude of the event. With time comes certainty, but time also erodes options (such as evacuations) in the event that you underestimate the outcomes of a particularly event.

What you want to avoid is being on the other side of an event of some consequence (weather, economy, market, or some trick you've decided to try with your car/boat/motorcycle/skateboard/mountain bike) and hanging your head, kicking the dirt and dazedly muttering, "coulda, woulda, shoulda" in some refrain. Katrina, 'subprime' (which was so much more than that), lead paint, asbestos, DDT among many other events, bear witness to the costs of underestimating (or ignoring) consequences.

Weather events, like economic and market events, (and our personal stunts that end badly) can only be evaluated with full clarity in hindsight. These critics suffer from the need to second guess decisions that needed days of consideration and many hours of execution on limited information from the vantage point of hindsight. I surely do not want my health and welfare in their hands. From where I sit still recovering from being in the purple wind bands in a county whose electrical grid was entirely (not partially) decimated by many hundreds of fallen trees (of the 150-200 year old age), the din of the sideline carpers at least is drowned out a bit by the hum of the generator and buzz of the chainsaws.

Such writings also make me question if the internet's democratization of opinions is such a good thing. Freedom of speech and having something worthwhile to say do not go hand in hand--and sometimes the internet and the many forums of 'expression' feel like the democratization of blather. I'm sure that I've made my own deposits to the blather bank, but I try not to.

All the better to overestimate Irene and have her disappoint, than to have her juiced up and/or wobbling outside the bell curve of underestimation. I can point to several hundred old oak trees more than 150 years old that have weathered many a hurricane...but not this one. And many a person decided to ride out Katrina because 'in their experience' such storms, despite warnings, could be endured. Right.

The art of assessing risks and making considered judgments based on a possible range of consequences is just that...an art. When we have to act is not always at the time that we have full information. And having full information generally makes it too late to act. Too many last breaths are preceded by "If only..."

Return from Hiatus

2011-08-29T14:22:00.000-04:00

I am returning from a much needed vacation away from the markets. I found myself zigging when the market was zagging and then zagging when it was zigging. Guess what got zinged?

I have a page on this blogged tagged "wisdom". It serves as a place for me to write down things that I find important and want to both reference and share. I would like to highlight a couple that are very meaningful to me.

The first is from Musashi:

Harmony and disharmony in rhythm occur in every walk of life. It is imperative to distinguish carefully between the rhythms of flourishing and the rhythms of decline in every single thing.

And the second is from Munenori (a nice corollary to the one above):

When fighting with enemies, if you get to feeling snarled up and are making no progress, you toss your mood away and think in your heart that you are starting everything anew. As you get the rhythm, you discern how to win. This is "becoming new."

Sun Tzu reminds that choosing not to fight can be a successful strategy. So with the zig and the zag and the zing, I elected to put my pencil down and rest my head a bit. I am feeling more clear eyed and refreshed from the break.

Parsing out Leisa-land "Stuff" from The Perplexed Investor

2011-07-10T12:38:00.000-04:00

I shouldn't let my state of peplexion (This is a word that I freely made up when naming this blog in 2006) fill this space with other "stuff" that I want to write about that has no bearing on the market. But I like to write, and I like to share the other stuff, so I elected to create a blog called Notes from Leisa Land. It is a bit cleaner, and is likely to help eliminate some confusion about why the heck am I writing about wine, snakes or countertops.

I hope you'll visit me there.

Notes from my Life: Life and death

2011-07-05T23:25:00.002-04:00

If I had some perspicacious or lucky guess on this market that we are in, I'd comment about it. I've no clarity of thought, and I've been preoccupied with other projects and some down notes that Nature plays in her sometimes awful symphony. (This is a rather morose post, so if you are feeling down, you'd best move along).

First, my long-deceased brother's birthday was over the 4th of July. I did pause to remember him though we were estranged at the time of his death. I wrote about the circumstances of his death here. I hope that you'll take a moment to read it if you are preoccupied with what you do, how much you earn or any other externally calibrated notion of you worth. You can find it here: http://theperplexedinvestor.blogspot.com/2007/01/deeply-personal-story-but-investment.html If you are quizzical and cautions and are wondering what the post is about, it is simply about my brother who lost his money in the stock market and took his life. He had a beautiful wife and two young girls. He has been gone more than 21 years now. Perspective is everything in most things. Never lose yours.

Rusty, the orphaned deer, had to be dispatched to the netherworld. A raging infection---likely the result of no mother's milk gained the upper hand. He was one of the gentlest creature I had the pleasure to ever know. What a gift to know him. Nature blew a rancorous note on a trombone with respect to sweet Rusty. How I am glad that I was a small part of his short life.

I learned today that a friend lost two dogs over the weekend under a tragic circumstance. I mourn for her loss.

Today, we had to dispatch a snake to the netherworld. I do not say this lightly. Here is the fella snaking his way into the bird feeder bush.

Well, I didn't kill him (I left that to the men-folk), but I did enter the discussion with my husband and son on this fella's fate. I ensured that we had not mistaken him for the more harmless puff adder/eastern hog nose. You can see that the color and striking pattern are similar but distinct enough. All snakes heads look triangular to me in my fear filled squinting eyes.

Trust me when I tell you that our bias was to let him go. However, he was just too close to our normal activities (which should have shooed him away). After careful deliberation, we agreed that the risks of his staying in this habitat were too great for us. Had we encountered him just 25 yards away we would have let him be. 10 feet from us is just oo close.

This bush that he was in is a snowball bush; and it is in it that we have our bird feeder. The birds were still feeding in that last frenzy before they go to winkie land. This bush is adjacent to the house and the deck on which we were sitting. Mark spied the movement and saw that Minnah and Malcolm had a bead on him.

We brake for snakes. We don't take killing snakes lightly, and letting them be is a very high preference. I took some pains to make a positive identification as you can see above. I will always remember the Richmond Times-Dispatch outdoor writer, Garvey Winegar, writing a column about donning a mining hat to safely view the dusk-post dusk ground in Virgina to keep from stepping on these diurnal feeders.

While there used to be much made of the eight degrees of separation between all of us and Kevin Bacon, I can say that I'm 1-2 degrees separated from 3 people who have been bitten by a copperhead. That's too close for me. Further, for myself, I have had plenty of close encounters (wrapped around a bush that I was weeding around, raking them out of the flour bed and on the road while walking). That does not include the many copperheads (some bigger than my arm) that I have seen crossing the road at night. Once my daughter accidentally ran over a very large copperhead--large enough that in her Jetta it felt like a speed bump. We circled back to make sure that he was not suffering. He was gone. No doubt breeding this frisky fella for revenge.

I'm quite certain that given my fear of snakes, I would likely die quicker from fear than the bite should I ever be bitten. I will credit an Audubon book on reptiles given to my daughter at age 2 by a neighbor (eagerly called for as 'the snake book') as a major force in helping me desensitize myself to these serpents. Nevertheless, snakes always startle me. If you enjoy picking blackberries, sooner or later you will find a vine that moves or one beneath the bush. Once I looked down to see my sandaled foot adjacent to the eastern hognose that you see above. However, when I saw the strongly patterned snake, I thought (in a frantically shouting in your skull sort of way) copperhead! My berries went one way and I went the other.

This fella was in the wrong vector of time and proximity to my home. Too accessible to one of us trodding upon him, or one of the cats or dogs messing with him sealed his fate after careful deliberation. Not 15 minutes earlier, my husband was filling the birdfeeder in that bush. No doubt he was attracted by the last feeding by the birds. The snowball bush provides ample cover from the hawks who view bird feeder's as a buffet. Our feeder, nestled in the entangled branches provides amble cover from predatory birds, but apparently not great cover from snacking snakes. A paradox, no?

I do give that bush a keen scout before venturing into the arching branches. Some years ago I watched a black snake crawl into that branch structure, and just hang out like our venomous friend above. I would shudder as I imagined replenishing the bird feeder only to come eye to eye with a snake. I have played that vision over too often in my head. Here it was repeating twice real.

We captured the cats, and herded the dogs in. Our business was done quickly with minimum agitation to the snake. It was just too much danger to ourselves and our pets. Had we been in the woods, we would have let him be.

It is a good time of year to be vigilant in Virginia. While Garvery Winegar's admonishment to wear a mining hat in Virginia's beautiful summer evenings is not one that I've heeded, I do keep a sharp eye out when I can see with my naked eye, and I stay inside otherwise or have a flashlight. You should too. It was surprising with the level of activity that this fella was even about. Don't pick up buckets or anything else that has been turned over, and be particularly vigilant if you have rubbish/firewood near your home. A woodpile is a very accommodating habitat. While not a fatal bite to humans (pets another matter), the bite can cause a great deal of necrosis, swelling and accompanying pain. One friend's son almost lost a finger (snake bit him when the boy's hand was placed down behind him to support sitting); and another friend's wife was bit in the leg. That bite cause a lengthy hospital stay and continued swelling more than 6-8 months later.

I hope that your symphony is playing kinder notes. Sorry this post is not better written, but .....

07/07/11: Today I learned that Mr. Winegar passed away. I've long missed his writing since he retired; and I'm sorry that he has departed.

07/08/11: Another picture

Russell Indices Reconstitution

2011-06-23T11:45:00.000-04:00

The Russell Global, Russell 3000 and Russell Microcap are being reconstituted this week. The Russell Investments website, has that information available to you. You may find it here. If you've not visited the website, you will find interesting information about index composition as well as real-time market analysis.

From the website, here is a graphic of the reconstitution time-line (Click to make larger):

To assist you in bird dogging your own opportunities, I have created a FINVIZ profile for the additions and deletions for the Russell 3000 and the Russell Microcap. I did not include the Global as there are non-US listed companies there. To see the additions and deletions, simply click on the links to see the composition of each. At the FINVIZ site, you can download the tables into an Excel file.

**Russell Reconstitution**
Additions	Deletions
3000	3000
Microcap	Microcap

I have not looked at the list in detail myself (but will), rather I wanted to put the information in a format that you could readily analyze. I am not promoting Russell Investments products or services; however, I wanted to share with you an important action to popular indices that may have ramifications for your portfolio or house some opportunities.

How is this information actionable? With additions/deletions to indices for reconstitution, funds mirroring these index changes will have to buy/sell accordingly. There may be some long/short opportunities for sharp-eyed traders. Or, you may own some of these names, and you may notice some unusual activity.

I hope that you find this information useful.

Position: No stocks mentioned, but ready to investigate for opportunities.

Performance Transparency

2011-06-08T21:00:00.001-04:00

In my business and personal life, I am a big believer in appropriate transparency to various constituencies: lenders, stockholders, customers, donors and employees. Transparency builds trust and cultivates loyalty. Telling people what they need to know v. what they want to hear is a difference some do not understand. Best to make sure that you understand the difference too.

I like to nose around for no-spin, facts that help me independently assess which way the economic windsock is blowing. There is quite a bit of hot air in the media and through so-called experts that can whip that windsock around. If your nose is similarly motivated, you might be interested in what I want to share with you today-- a couple of companies that provide monthly operational reports: Fastenal (FAST) and W. W. Grainger (GWW). Click on the company name to be transported to their sales releases..

Though you may not have an interest in either of these companies from a trade/investment perspective, if you wish to have a data source that allows you to have a no-spin, facts regarding industrial supplier volume (a nice bellwether for economic trends from these giants), then you have a nice resource.

Because I believe that Fastenal provides the yardstick by which all companies should be measured for periodic reporting of key data, I wanted to highlight that for you. For those of you who are fundamentally oriented, how do your favorite companies measure up?

Since the market is getting a little jiggy, let's take a look at the industrial suppliers weekly chart (click to enhance):

As you can see, this group has exceeded its pre-crash high. I am not providing separate charts for FAST or GWW as their charts are identical to this one. As you are looking at performance information, viewing this industry chart will help you see what others are concluding and how they are voting with their dollars.

This is Rusty. His only care about transparency is that you can see when his bottle is empty and fill it back up. He's about two weeks old now.

Memorial Day

2011-05-30T13:27:00.000-04:00

Summer. Though it doesn't officially begin until June 21, it begins early, and unofficially, with Memorial Day and ends early with Labor Day. Two holidays that too easily become associated with three day flankings of summer and without a true understanding or honoring of spirit of the holiday.

While leaving my neighborhood to meet the other transport volunteer coming from Williamsburg, I ran over a neighbor's dog. I did not know the neighbor nor the dog. I'm a careful driver, and the only dog that I have ever run over is my own. She was a miniature poodle that came running out on dark rainy evening. Something she had done a hundred times before, but somehow she ended up under my front wheel. The anguish that I felt in hitting this lovely dog was no less. At least she was killed instantly, and I can say in all honestly, there is not another driver out there that could have avoided the outcome. She came flying out of a wooden fence enclosure (intent on chasing/confronting whatever vehicle she heard) where there are tractors housed (so I had no chance of seeing her movement sooner nor even anticipating that an animal would dart out). She then stopped right in front of me. There was no place to go, and veering right or left would have had a more noxious and gory outcome as she would have been pressed beneath a wheel.

There I was kneeling beside this jumbled body sobbing in anguish, " No, no, no." The owner obviously heard me and the nature of my lament would have been unmistakable. He came out, knelt on the other side of her. After a minute, he straightened her out and said, "This is going to be very hard for them." He offered some comfort to me, as he was overcome as well. He picked her up, and carried her across the street to her home.

I left to meet my transport. I was so overcome (and I'm generally pretty calm during disasters), but I was deeply shaken. I managed my transport--a beautiful Brittany named Phoebe. But I ended up with a stress induced headache and a general sick feeling in the pit of my stomach that did not abate until yesterday. The irony of the day did not escape me. Dogs, cats and children are no match for a car--and try as we might, those cruel intersections of time and space create grievous emotional wounds.

I stopped by the home of the dog later, but they were not home. I went home and wrote a heartfelt note and delivered a basket of flowers. In my note, I mentioned that I wished I could have turned back the hands of time and expressed all of my heartfelt sadness--knowing their own sadness would be amplified even more so. I also mentioned that I wished I had known her name to mention it in my letter. I put my e-mail address on the letter. I received a kind acknowledgment of the note and the flowers, as well as their concern for my own feelings. Her name was Roxy, and they had 8 good years with her. Their note back meant much to me.

With Memorial Day, the names of the fallen should also be known. I had the opportunity to watch "Taking Chance:" It is not a movie I had seen before, and Kevin Bacon plays the lead character beautifully. It was a fitting movie to see on this weekend of remembrance. The movie is based on a true story. Rather than my telling you about it, you can read about it here. I hope that you'll take a minute to do so. And if you have a chance to see the movie, I think that your time will be rewarded.

Our fallen warriors and our workers on whose sweat 'stuff gets done'...they bookmark the time of the year where procreation and recreation fill the long days. I've not looked at one stock chart this weekend, and I'm happy for that.

Notes from my Life: Fawn!

2011-05-28T07:49:00.000-04:00

I heard that my next door neighbor was caring for a baby deer. It was found near his pond by a young man who was fishing. It wasn't a case of the mother depositing it and foraging. He was dehydrated/starved and had a major tick infestation in his ears. Tim believed that it was no more than a day old, and he was likely a triplet runt left behind.

I wandered over there just now. They've made a safe enclosure with straw bedding. As he lay there in the straw (I'll get pic), I marvelled that he wasn't as big as an adult cat. Of course his legs were tucked under him, but even then he is tiny. He is being fed from a bottle. He enjoys being held, and I got to both hold him and feed him. They had him inside, and he was laying with Lacy, his lab mix. Those oft-circulated photos of deer and dogs are no anomalies.

Spring is often a cruel time of year where the helpless emerge into the world and do not find it hospitable. We recently had a wood duck pair make a poor nesting choice, that had no other possible outcome than fatal disaster for the hatchlings.

Since the rapture did not come to pass, I guess the harsh realities of life will come to pass. Why that person got any air time, I will never know.

I'll be helping out the Brittany Rescue today, and shuttling a dog a short bit up the road. It is nice to lend a hand.

Real Estate Woes

2011-05-27T17:30:00.000-04:00

My daughter is ready to spread her wings and purchase a home. She had an offer in on one Fannie Mae home. She had quite a saga. She pre-qualified for a loan. Found a home. Made an offer. Verbally said yes. Then said best and final. Then copper was stolen from home. She was strong armed to pay for 1/2. Financing became difficult due to property age and new underwriting standards. Owner couldn't wait 48 more hours for my daughter to get the second financing secured (she had verbals that the next lender would underwrite). My daughter's offer was 15k more than the offer taken. She was treated pretty shabbily for being a first time home buyer. She learned a few lessons.

While it was a neat, old property, there were some real issues with it. In preparing it for sale, the painters just scraped all of the lead-based paint off and let it collect around the perimeter of the home. All of the windows were oversprayed on both the inside and out. The windows were painted shut, and the kitchen cabinets were rolled--doors shut and all of the hardware covered in paint. But he property was charming, and she was willing to remediate those items. She was heartbroken when it fell through.

To be fair, they did ask her to give them a $2K non-refundable deposit. It was a pretty crappy thing to ask for, because she had already agreed to pay 1/2 for their plumbing mishap (when she had no legal requirement to do so). She also fixed 11 panes of glass to satisfy her underwriter to meet the deadline. Otherwise, they would have piddled about and likely made her pay for 1/2 of some exorbitant price. Oh well...the new owners have at least 11 panes of glass that have no overspray. She didn't give it to them because she had no way of controlling what the new underwriter would opine even though they had verbally said it looked doable. It looked doable to the other one too! She's not in a position to lose $2K to the whims of the mortgage gods. She said no, resubmitted her offer in 48 hours when she got a yes in writing and gave them the $2K non-refundable. Too late---they had settled for $15K less. Sigh....

There is no shortage of homes available. My daughter is moving onto other properties. I've been in research mode, having not visited real estate too much since my exhaustive work back in 10-2006 and throughout 2007. I used to keep a list of the trustee sales on each Friday. It was an informal way of chronicling the snowball of foreclosures. I used to split the note amounts between < than and > than $90K. At first the foreclosures were mostly in the lower range, and then they moved higher.

Now, it has been a while since I tiptoed into that work. But the real madness in escalating home prices began in 2005 and continued through 2009. The snapshot to the left shows the issue that I'm seeing quite starkly--that any poor schmuck that bought a home in 2007-2009 is potentially underwater. This home is assessed at $315K, but Fannie Mae took a fanny-whacking and has a note of $458K--the assessment is not even 70% of the note that was taken back. In fairness, the home is listed at $255K and will likely make a nice purchase for someone.
However, I'm seeing plenty of Fannie Mae homes that are listed higher than the assessment. Good luck with that. There are sublime homes, and there are "oh-my-god-can-you-live-in-that homes". Assessments kept up with the madness. Here's a look at an assessment history that is the norm for newly built homes.

No fun paying $569,835 for a home that now sports an assessment of $437,600. While the absolute numbers above are not representative (that happens to be an expensive property), the relative relationship between assessments and purchase price is representative.

For one nearby county, here is the history in a lovely middle-class neighborhood that is represented by attractive homes on large lots.

When we ask the question, "When is the bottom in real estate?" I would hazard a guess that the answer is nested in an assessment table. If we were in the froth in 2007-2009, I've got to believe that it is somewhere in the 2003-2005 valuation area. But that is a guess, hazardous or otherwise. An average of those assessments puts us at about 69% of current assessed values.

If you have voyeuristic tendencies as I do yet don't know where to look, you can peruse the Fannie Mae listings in your area by going to http://www.homepath.com/ Select your state and the city/county that you are interested in.

I also dug up an old study that I did when I was convinced that this was never about subprime but rather something larger. Simply put, all housing had been bid up in a way that it outstripped earnings. And for lenders to lend, they had to come up with fanciful (and fruitcakesque) ways to lend money. Here's my little nebbish chart.

It was my grand ah-hah! I still believe that this big ball will get unwound further.

The other thing that I'm seeing are homes coming onto the market as part of estate settlements. These are homes where the carpet is old, bathrooms are gross, kitchens sorely in need of updating, peeling paint, rotten trim, roof rot and HVAC repairs. These are not homes that can get financed through FHA due to their requirements AND these are homes where there is not much available money from cash-strapped heirs. On top of our current stressors, we have the bolus of older folks who are dying and leaving behind homes that are nearly uninhabitable. (I'm talking about ordinary middle-class folks, and not the monied class).

I'm not really posing any questions, and I surely have no answers, but these are 'things' to ruminate upon and think about how their dynamics will shape our current woes.

Colleagueship

2011-05-26T08:18:00.000-04:00

With Mark Haines' recent passing, CNBC reporters spent yesterday remembering their colleague. It was a visceral reminder of the importance of the binds that tie us. My last group of colleagues used to make fun of me a bit in the reverential way in which I regarded colleagueship. Yesterday's tribute to Mark Haines by his colleagues was a reminder that I'm not in a minority.

Good colleagues anchor us when we need to be grounded and push us to step in the tenuous ground of the unknown. They laud our talents and tactfully help us reflect on our lesser traits. They have our back and are not looking for a tactical place to insert a dagger. The very best thing that we can have in our work lives are true colleagues. They are often our true friends, too.

Yesterday's remembrances of Mark Haines' rich legacy at CNBC was a reminder of the importance of colleagueship. Colleagueship is both the personal and the collective. It does not exist without individuals who embrace that grand ideal of "all for one and one for all." Yesterday's remembrances demonstrated how much purchase in practical life a grand ideal such as colleagueship can gain on the slippery slope of workplace dynamics.

Colleagueship should not be relegated just to our off-line lives. Though one not oft-practiced; it is a useful ideal in on-line life as well. On-line life gives us a chance to express our opinions no matter how sublime or noxious. We can instantly vote up or down on just about anything. Being able to say something is not the same thing as having something (of merit) to say--I suppose that is the difference between blather and discourse, and I'm quite sure that there could be several indictments against me on the former.

As part of our on-going professional growth, cultivating the quality of our colleagueship in our on-line and off-line venues is a worthy endeavor.

Notes from my Life: 05/22/11

2011-05-22T18:52:00.000-04:00

If I had any great ideas about stocks, I'd share them with you. Alas, I'm finding the market's current apoplexy unnavigable; therefore, I exercising my right just to stand aside. But there are a few things going on outside of the market, so I thought I would write a small bit on them.

Yesterday's mail brought Howard Marks' book: The Most Important Thing: Uncommon Sense for the Thoughtful Investor. I'm three chapters into this well written, sensible and accessible book. Marks' conversational style, presented thoughtfully (as you would expect from the title!) make for a very enjoyable read. As most of what I've read so far reflects many of my own thoughts, I'm finding that it tickles my sensibilities--and articulates them so much better than I've been able to do! I'll write more later, but it is definitely going to go on my recommended reading list.

We have been invited to a 50th birthday party for someone billed as "The Queen of Shooters". The moniker is apt, as she always concocts great shooters for parties she attends. I've never made a shooter in my life. Guests are asked to bring a shooter to the party--which will be judged by the birthday girl. Well, I consider this a culinary challenge, as well as a chance to venture into a food frontier. As I want to ensure that I don't end up with too much of a mess, and I have something easy to transport and share, I elected to get these injectors. I ordered extras...I can see these being featured (responsibly) at an entertainment event at my home.

My serendipitous excursion into finding shooter recipes led to something called molecular gastronomy. You did not expect to read about that here, now did you? Using food-stuff (think pureed olives or creme brulee) that is bathed in a solution of alginate (and then rinsed in calcium lactate solution), it creates an exterior that gels, while the interior remains soft so that it explodes into your mouth. Though tempted, I've not ordered any alginate or calcium lactate. But if you are interested, you can go here, http://www.molecularrecipes.com/, (and photo credit goes to them too) and learn more.

My next serendipitous milestone took me to whip creamers that use nitrous oxide cannisters to whip the cream. I was watching America's Test Kitchen, and they featured the Liss model on their gadget segment. Well, in doing some research, I learned that in addition to whipping cream, you can make mousse and foams and you can infuse oils and alcohol with all sorts of flavorings...habanero vodka or rosemary/garlic olive oil. The N2O creates a pressurized environment that allows cream to be extruded. As much as I cook--particularly desserts--you would have thought that I would have his gadget in my arsenal of cooking tools. Alas, that is not so. But, I did order two of them, along with the necessary cartridges.

I'm coming full circle here, as I believe that watermelon shooters with a hot pepper bite might just be the ticket for the upcoming party! I still have to wrap my head around my final offering, but the possibilities are starting to gel.

Our weekend weather was beautiful here...soon it will be hot, humid and just plain miserable. But for now, it is great to see the flowers, hear the birds, and watch the garden grow.

If you are looking for a beautiful cake to take to any summer outings, let me suggest Chef John Folse's Summer Lemon Pound Cake. It is divine on its own, but with glazed mixed berries (creme de cassis and orange marmalade on the stove, then pour over berries; toss gently) and some premium vanilla ice cream, you will delight many and use nature's bounty in a most delicious way.

Notes from my Life: 05/14/11

2011-05-14T11:12:00.000-04:00

This place has been a wasteland of late, for which I apologize. I have experimented with writing a few articles directly for Seeking Alpha. They have a program that if you submit directly to them, they pay you a penny per page view. I've written three articles, and they were kind enough to publish all three. Of all the stuff that I have written over the years, both here and other places, it is the first time that I've been paid for it. So, it is a bit of a milestone. If you have an interest in reviewing those articles, you can find them here.

In this interregnum, I was busy helping my daughter purchase a home. It was not successful. Everything that could go wrong did--none through any fault of her own. It was a good lesson for her in negotiations, risks and rewards. Unfortunately, she had her hopes set on acquiring this property. Learning to deal with the bitterness of disappointment was a central lesson as well as the perils of dealing with others when they are not engaged in good faith negotiations. Something we all must learn to do.

I have also been digging out of a pile of undone things that have been accumulating in my life. Needful things, that bite you in the ass if left undone too long or trip you up if piled about. Putting stuff in a Goodwill bag was just so difficult. How does one become inextricably tied to an article of clothing? I have such a good eye for utility, that the someday/maybe nature of most things in my life make it difficult to let go. I need to practice non-attachment.. . . and exercise, and better diet. There is no end of things that I need to improve upon. At least I confine the practice of that trait to myself, and operational processes!

I hope that your own life matters are in good balance or that you are in a process to restore that balance as well as you can.

Fact or Opinion?

2011-05-12T07:05:00.000-04:00

My daughter is a special education teacher for 4th and 5th graders. One learning task was to help her charges determine the difference between fact and opinion. She created an enjoyable slide show to engage them in this important task. She chose the recent royal wedding, something with which they were all familiar. Each slide had a statement requiring them to answer fact or opinion.

"The queen wears silly hats." Fact. No, uhhmmm, opinion.

As she was sharing with me this enjoyable exercise, I was reminded that in market life we must keep our wits about us and ensure that we discern between fact and fiction. Insofar as I know, there is no one that can divine the future. Accordingly, statements of certitude about the direction of the market or your favorite stock, are just an opinion. It is a fact, and not my opinion, that depending on your position in the market, you will overweight opinions of others who support your position.

While the future is unknowable, it is defined by probabilities assigned to possibilities. Nevertheless, it is a fact that only one outcome will be achieved--and it may not be the highest weighted probability. Do not mistake an emphatic embrace of an outcome as a fact. It is comforting to follow those that are so certain that the next bear market lurks behind every bump down, or that the bull market gallop is sustainable in perpetuity. Gold and silver and other commodities are the most recent entries into the fact box that nothing goes up forever.

Another fact about the market is that there are some very smart folks on both sides of any opinion about the market. I learned long ago to discard the opinion of the perma B's (bulls/bears/buffoons). Worse is that when they finally get it right, they crow and chest thump. Avoid those people. To be sure it builds camaraderie as we like to be around people who see things just as we do. They are so smart! Be careful of the consensus opinions. If everyone has bought or sold, who is left? The very smart people on the other side of your trade. The market goes through enough cycles to make even an imbecile look like a genius at one point or another. I forget who said that the the crowd is right during most trends (up/down), but generally wrong at the turns. It's the turns that are a bitch, and that's where most drivers become acquainted with ditches and trees in a way they would rather not.

I've had my own idiot/savant moments. My work is to tip the scales toward savant. I managed to almost top-tick (a fool's game!) silver on a short via ZSL. Such a beautiful trade. It reminded me of when I was 5 or so riding my bike. I let go of the bars to show my parents that I could ride with no hands. I promptly crashed. While that example seems like a more fitting story for one that BOUGHT silver at the top, it is nevertheless a poorly managed trade when it is closed too early. I need a push broom to sweep up all of the money that I left under the table and on the lawn. Sniff!

Equanimity in the market is the most precious commodity of all. Unlike other commodities, this is one that you pay dearly for if you do not have it, and once you possess it, it will pay you. Like my exercise and diet regimens, my practice of equanimity is a spotty one. Having a balanced view of the market and your position in the market is critical.

It is a fact that the market closed down yesterday. It is a fact that none of us knows with certainty what the market will do today. Though there will be many opinions about today's market and the market of a 1000 tomorrows, it is a fact that you must choose among outcomes and position in accordance with your risk profile and time horizons. Understanding your risk profile and time horizons is the first step in your practice of equanimity.

Sokol's Great Lubrizol Misadventure

2011-03-31T23:14:00.000-04:00

While there is much to say about Sokol's lapse of judgment (the kindest thing that can be said about his purchase of ~100k shares of Lubrizol and advancing the company forward as a potential investment prospect), I offer these four observations:

Observation 1: BH has a code of conduct of ethics that clearly outlines expectations of employees. You can read that code here.

Obervation 2: Sokol's activities appear to violate this code. Specifically, the section on Corporate Opportunities, noted below (highlights are mine), seems to be at the forefront of his abrading against this code:

2. Corporate Opportunities.

Covered Parties are prohibited from taking for themselves opportunities that are discovered through the use of corporate property, information or position without the consent of the Board of Directors of the Company. No Covered Party may use corporate property, information or position for improper personal gain and no employee may compete with the Company directly or indirectly. Covered Parties owe a duty to the Company to advance its legitimate interests whenever possible.

In his position, Sokol would have been invited into confidential discussions and provided confidential information that an ordinary investor would not be privvy to. His making a personal investment on information that he obtained while performing his duties appears to be a clear violation of the above policy (to my eye). There is no defense to that code violation.

In the event that the clause above was too obscure, you would think that the following clause might give one engaged in such a transaction some pause:

Given the variety and complexity of ethical questions that may arise in the Company’s course of business, this Code of Business Conduct and Ethics serves only as a rough guide. Confronted with ethically ambiguous situations, the Covered Parties should remember the Company’s commitment to the highest ethical standards and seek advice from supervisors, managers or other appropriate personnel to ensure that all actions they take on behalf of the Company honor this commitment. When in doubt, remember Warren Buffett’s rule of thumb:

“…I want employees to ask themselves whether they are willing to have any contemplated act appear the next day on the front page of their local paper – to be read by their spouses, children and friends
– with the reporting done by an informed and critical reporter.”

And finally, under "Violations of Standards" we have this

2. Accountability for Violations.

If the Company’s Audit Committee or its designee determines that this Code has been violated, either directly, by failure to report a violation, or by withholding information related to a violation, the offending Covered Party may be disciplined for non-compliance with penalties up to and including removal from office or dismissal.

So egregious the transgression of this code, so indefensible his actions, there really was no choice but to resign for there would be no reasonable choice but to fire him.

Observation 3: Perhaps the code should be a little more specific for those that are unable to comprehend their special access to information as an invitee for the purposes of BH making acquisition or the simplicity and power of Buffet's rule of thumb and state: UNDER NO CIRCUMSTANCE IS A COVERED PARTY TO HAVE AN UNDISCLOSED FINANCIAL INTEREST IN A COMPANY THAT IS RECOMMENDED FOR CONSIDERATION FOR INVESTMENT/ACQUISITION. ALL SUCH FINANCIAL INTERESTS SHOULD BE DISCLOSED TO THE AUDIT COMMITTEE AND LEGAL COUNSEL AND THE COVERED PARTY WILL ACT IN ACCORD WITH RECOMMENDATIONS BY EITHER OF THOSE TWO BODIES. Or something like that... At the very least, BH needs an internal control that BEFORE an investment is made, there is an internal conflict of interest check to ensure that such matters are discovered prior to their becoming issues and that executives with recommendation and/or approval responsibilities submits a periodic disclosure of his or her holdings.

Observation 4: You hear much about these so-called smart guys. Well, you and I could easily read the Code of Conduct and know that buying Lubrizol on information obtained as an invitee for purposes of a transaction consideration and subsequently recommending Lubrizol without disclosing that one had a financial stake in the transaction, smells worse than three day old fish. Smart money has not looked too smart in the last decade, and not so smart in this new decade either. Another good example for not selling yourself short!

Squeezing into True Religion Jeans

2011-03-30T12:43:00.001-04:00

Today's listing boat concerns the ~22% short interest in TRGL. Let's take a look at the chart (click to make larger):

According to FINVIZ, the short float in this stock is just north of 23%. They have already reported earnings which were not the catalyst that the shorts were hoping for. The company's financial profile looks terrific: they have great earnings, cash flow and no debt.

Not sure what the bears are looking for, but they might be at a campfire expecting to roast marshmallows and might go home with with singed fur. I took a long position earlier today anticipating a squeeze with an entry of $23.16. Let's look at a 30 minute chart pulled today:

A breach of $23.40 may cause some ~~bovine~~ ursine! angst from being wrong-footed on this short trade.

Post Cards from the Edge: Existentialist Market Warrior

2011-03-06T11:56:00.003-05:00

Prologue: This post puts together a few things that I have read (and in some cases written about) separately. I wanted to put them together in a post).

Justin Mamis wrote that we all find our particular way of becoming a victim in the market. That is true in life as well but without the stark price tag. Think of one of your great friends or colleagues who is wonderfully interesting and engaging—who everyday has something new and exciting to share with you. Sometimes your friend buys you lunch or drinks; other times your friend freeloads on your nickel. At other times, your friend brings you an unexpected gift; but jilts you on your birthday.

Such a friend! Except, sometimes your friend arrives late or sometimes not at all. And sometimes your friend meets you and sucker punches you. You withstand these breaches because your friend is so exciting to be with and the propensity for delight and surprise makes you willing to withstand the indignities.You don’t need friends like that; and if you expect the market to be a friend to you, that is just the type of friend it will be.

The market was not created to keep your money safe in a happily hereinafter way. To be sure, there is an entire industry crafted around that very notion. However the laws of money dynamics do not work that way. While a rising tide lifts all boats, when the wind shifts, or worse, the tide goes out, your portfolio might feel like a dinghy traversing the Cape Horn passageway.

Approaching the market with the right mental model will go a long way toward keeping your feet planted on your road to discover your inner market genius and keeping your eyes and ears tuned to speeding vehicles that might mow you down. That model conjures up visions of raccoons and skunks in search of pheromones and all they found was the tough, acrid love of Goodyear or Michelin. It is a vision worth keeping in your head.

We could take our mental model many rungs higher, and craft a great existentialist view of market life and our place in it. Here are a few bulleted points from the website, All About Philosophy about Existentialism:

• Human free will
• Human nature is chosen through life choices
• A person is best when struggling against their individual nature, fighting for life
• Decisions are not without stress and consequences
• There are things that are not rational
• Personal responsibility and discipline is crucial

Let’s consider the third bullet: A person is best when struggling against their individual nature, fighting for life. That, my friend, is the essence of what I want to convey with great gravitas and import. We must first understand and conquer our own demons before moving to outward.That leaves us with a more concrete model of a great warrior. Gerald Loeb wrote the investment classic, The Battle for Investment Survival—one of those timeless books that warrant your time and attention: and such a battle it is!

Your approach to the market is that of a warrior—and for a warrior to survive, s/he must be prepared physically and mentally. Miyamoto Musashi, pictured to the left (click on image to learn more about Musashi from Wikipedia), was a Japanese swordsman in addition to a long list of other accomplishments: expert swordsman, author, artist, calligrapher, sculptor, teacher and finally, strategist.

Go Rin No Sho, or The Book of Five Rings, is the work for which he is best known. I have a cork board by my desk. To it I have pinned the following nine underpinnings of Musashi’s philosophy cum success. I look at these each day, though, like exercise and other needful things, I must profess that my practice of them is left wanting--and that does translate into lack of desired results.

Think of what is right and true.
Practice and cultivate the science.
Become acquainted with the arts.
Know the principles of the crafts.
Understand the harm and benefit in everything.
Learn to see everything accurately.
Become aware of what is not obvious.
Be careful even in small matters.
Do not do anything useless.
The Book of Five Rings
Miyamoto Musashi
Translated by Thomas Cleary, 1993; 1997 Barnes & Noble Books

It is a slim little book in a number of incarnations, and I highly recommend it.

The importance of these items in everyday life is self explanatory. A rich and informed life is a mosaic of understanding arts, the crafts and science and more importantly developing skill. Doing so provides balance. To do battle you must have skill and confidence. To be a strategist you must have the proper perspective (seeing things accurately—and becoming aware of what is not obvious). Being careful even in small matters and resisting engaging in useless tasks are the foundation of discipline and efficacious undertakings.

To succeed as a warrior you must meld strategy with mental and physical preparedness. You might find this metaphor preposterous. There is an aphorism, “there is nothing new under the sun”. That saying is true in market life and non-market life. Using a warrior metaphor will help you remember that there are many skills that you need to bring to the battleground called market life. These are the same skills that you need for non-market life. Failing to see the parallel between market and non-market life means that you will bring to the market the same potential for victimhood as you do in your non-market life.

Two other passages from this wonderful book are instructive:

Two essential elements of ancient martial and strategic traditions:

The first of these basic principles is keeping inwardly calm and clear even in the midst of violent chaos;
The second is not forgetting about the possibility of disorder in times order.
~~~~~
Harmony and disharmony in rhythm occur in every walk of life. It is imperative to distinguish carefully between the rhythms of flourishing and the rhythms of decline in every single thing.

The last item that I would leave you with is something that I have found very useful when I find myself in a rhythm that is akin to running the market gauntlet. This passage is from Yagyu Munenori. I often cite this passage when I see my on-line colleagues frustrated by market events or their own actions:

When fighting with enemies, if you get to feeling snarled up and are making no progress, you toss your mood away and think in your heart that you are starting everything anew. As you get the rhythm, you discern how to win. This is "becoming new."

The Book of Family Traditions on the Art of War
Yagyu Munenori
Translated by Thomas Cleary, 1993; 1997 Barnes & Noble Books

I hope this little post helps provide you with a model for crafting a mental model that works for you.

Institutional Voyeurism: Gold and Gold Miners

2011-02-25T10:22:00.000-05:00

Some years ago I did more writing on Institutional Voyeurism. There is something fascinating about taking a peek under the hood of institutional holders' (IH) portfolios. I indulged this fascination this morning upon waking with the idea of wanting to look at the composition of IV's in both GLD and GDX that had these tickers as a top 5 position.

My favorite place to go on IV's is J3SG My data is from their website. Here's the table that I prepared showing institutions group by the ranking of each ticker in their portfolio (click all images for enhanced viewing).

What is this table saying?

GDX: 52.5% of the dollars are held by 6.4% of the total IHs as a top 5 holding.
GLD: 42.8% of the dollars are held by 16.6% of the total IHs as a top 5 holding.

Let's take a closer look at this composition:

Forty-nine % of holdings are held by three IH's: Julius Baer (32%/position rank 1 in portfolio), Blue Ridge Capital (10%/position rank 4 in portfolio) and Greenlight Capital (7%/position rank 8 in portfolio). Seems very lopsided to my eye. Let's look at GDX's kissing cousin, GLD:

GLD is enjoying more diversity of distribution. <1% holders comprise 46% of the holdings. The other notable large holders are Paulson (16%), Northern Trust (8%) with the balance of holders distributed as 5% and less.

What conclusions can be drawn? The obvious is that there appears to be a rather heavy concentration in these funds among just a few AND that concentration is a top holding in the portfolio. In contrast, USO, for example, while having concentrated holding among the big investment banks, does not have such a high percentage of top 5 portfolio ranks.

This may just fall into the category of interesting, not actionable. But I thought I would share it with you.

Weekly Sector Report | 02/11/11

2011-02-14T07:43:00.000-05:00

Sorry to be late out of the gate on this week's sector report. The broad market index advanced 1.6% for the week and 5.79% year to date. Also, the broad market is just 4.94% below September 2007 levels. Let's take a look at the sectors (click on all images for enhanced viewing):

At the subsector level, here are the 10 top/bottom performers:

As you can see, the super-sexy Tire industry was a big winner, and Auto Parts has resurged again after a correction. There are not many tickers in the tire industry. Here's a snapshot from the WSJ Industry Page

One of the reasons I enjoy reviewing sector performance is that it forces me to poke about and find names that might be performing outstandingly, yet are flying below the radar. TWI is one such name I am familiar with. I'm not in this name currently, but I thought it a nice stock to highlight. Let's look at the chart:

It has more than doubled since September. One way to look at the headline movers, in this particular case, agricultural stocks/equipment, is to think about ancillary participants. TWI makes the tires that go on the equipment. Getting to know stocks in moving sectors and to think about stocks in supplying sector, can help you pinpoint some attractive opportunities as they unfold.

We will close with the broad market index which has successfully cleared its volume bar hurdle:

I've prepared for you a chart book:

Weekly Sector Report | 02/04/11

2011-02-06T12:55:00.000-05:00

The bulls found their footing after stumbling the previous Friday. The broad market sector was up 2.75% Here's how the cylinders were firing on the markets' engine (click all images for enhanced viewing):

Moving to the industry level, here are the Top 10 Best/Worst performers:

The sharks are swimming in the current areas:

We close with the broad market index:

With this week's close, it has poked its price nose above the long volume bar that has previously acted as resistance.

As usual, I have created a full report for you:

Weekly Sector Report | 01/28/11

2011-01-29T14:12:00.001-05:00

Such a day in the market on Friday! The unrelenting march forward was stopped and then pushed back. For the week, though, the change was merely a .35% decline. However, looking at the sector/industry charts, you will note that that there has been some serious damage done to these charts. Drilling down to individual stocks, the carnage is even more brutal.

We must be ever cognizant that market indices are like a house which goes up brick by brick. For an index, the bricks are individual stocks and their collective performance. An index house will eventually roll over once the sector bricks are weakened one by one--but that rolling over is through a successive failures in stocks/sectors. That is why topping is a process. And while the market tops over a period of months (e.g. Financial topped in Feb of 2007 (in fits and starts); Basic Resources topped a full 16 months later), they all seem to bottom at the same time, with October 2008 and March 2009 a collective double bottoming for every sector.

I've been providing a view of the total stock market index. Let's take a look at that daily chart here (click all images for enhanced viewing):

As we can see by the volume@price bars, we have quite a bit of price memory here. Note that the last peak is at the bottom of the bar which would offer the next range of support with some worrisome vacuum underneath.

How did our sectors fare over the week?

Here are the top/bottom ten performers at the industry level (This is weekly only):

In days such as yesterday when all the world is going to hell (or seemingly so), spotting divergences is informative (for those of you that trade individual securities v. indices). For those of you inclined that way, this weekend is a good time to review that information which you can do easily on FINVIZ (though I have prepared my usual report for you which you can find here):

Industry subsector performance: You can find the industry subsectors here. (sorted in best to worst). If you like to see this information graphically, you can do so here.
Individual stock performance: You can find individual issues here (sorted best to worst)--be sure to use the filtering tools to pull out thin capitalizations and low priced stocks--a graphical rendition is found here where you can see the sector + individual notables (the good, bad and the ugly).
Short interest change: You can the change in short interest (in addition to the total short interest here.
Relative Volume: Viewing sectors by relative volume can also be fruitful. You can find that view here.

Let's see where the short interest changes are:

Whether we had a healthful consolidating pullback or something more will be determined with the passage of time. Many of the sector leaders (e.g. automobiles/parts) have been weakening over the past couple of weeks. Price action has moved ahead of the news. News is now coming out that informs the correctness of the market's anticipation of future events. The market by its nature is anticipatory; however, we should always remember that its crystal ball is cloudy. It does act decisively when its expectations are not met. We should as well.

I wish you good trading for next week, and I hope that that you find some use from this week's report.

Weekly Sector Report | 01/21/11

2011-01-23T19:16:00.000-05:00

The week saw the broad market index decline 1.05%. Only two sectors, media (+1.3%) and utilities (+.42%), were positive. Here is the weekly profile on the sectors (click all images for enhanced viewing):

For the subsectors, here is a graphic of the top/bottom performers. GE led the Diversified Industrials with a 4.9% change for the week:

This week short interest changes were reported. Familiar sectors are still on the top 10 list. I am also including for you the top absolute % changes in short interest so that you can see where the bears are increasing their holdings.

As is usual, I have prepared for you a chart book. I have a lagniappe for you! I included chart thumbnails for the 148 subsectors as well as the 24 sectors (in addition to the detailed weekly/daily charts). Sometimes the bird's eye view helps build perspective. You can find the chart book here.

And finally, I will close with the chart of the total stock market index--both daily and weekly.

First the daily, then the weekly.

The weekly chart (2nd chart) shows no damage to the trend lines, and the daily chart is showing some bumping against its trend lines. (Note that a 13 EMA on a weekly chart is a 13 week EMA, while on a daily chart it is a 13 day EMA).

I hope you find this information and the weekly chart book download helpful to your due diligence efforts.

Daily Sector Snapshot: 01/20/11

2011-01-20T18:26:00.001-05:00

The broad market was down just .29% today. Here's how the sector activity lined up (click all images to make clearer):

Here's a view of the Best/Worst today:

And finally, here is a view of the total market. When you enlarge the graphic you will see that there was a bounce at the 21 day exponential moving average (though it was breached during the day). It was also the highest volume day of the year so far..

Platinum and Precious metals is at the bottom of the list again today. Not a pretty chart unless you were short.

Daily Sector Snapshot: 01/19/11

2011-01-20T09:30:00.002-05:00

Given yesterday's rumbling across all sectors, I wanted to provide you with a quick snapshot. Here are the sectors with their respective changes as well as the best and worse (click all images for enhanced viewing).

And I want to close with a 60 minute chart on the total stock market index.

I will providing these updates daily...something that I used to do years ago--and something that I hope that you will find adds value to your own due diligence.

Weekly Sector Report | 01/14/11

2011-01-16T10:52:00.001-05:00

The broad market advanced .73%. Much is being made of how January starts as a great prognosticator for the balance of the year. Statistics for the first week in January and what that bodes for the entire market abound, along with analogs, ideologues and all manner of other 'stuff'. History repeats, rhymes, and more often reminds that we never step into the same river twice, but most times our feet will get wet, sometimes the river has run dry and sometimes we just might drown. I find that to be a useful mental model as an antidote for over generalizations and wild prognostications.

Here is how the major sectors performed (click on all images for enhanced viewing):

From the subsectors, here is a view of the best/worst performing areas:

I have created a chart book for you which you can find here.

Asset Managers is the second best subsector. Let's take a look at the sector chart:

There are many constructive charts in this space (so long as the market remains hospitable!). I created a chart book for you for the names in this space for those interested. You can find it here.

Let's close with looking at the broad market chart. I'm including both a weekly and a daily chart.

The weekly chart remains in the overbought area. On the daily chart, the daily is making a new high without the oscillator--a bit of negative divergence. As you can see from the broad sectors, money is moving into new sector leadership...and so long as this broad index moves up, that also denotes new money coming in.

I wish you good trading this week.

Weekly Sector Report | 01/07/11

2011-01-08T11:23:00.003-05:00

The first week of the new year saw the broad market index advance 1.05%, and some big winners and losers among the sectors. Let's take a look (click on images for enhanced viewing):

Automobiles and Parts was the big sector winner. GM (+5.75%) and F (+8.8%) were big contributors along with LEA (+7.18%) and MGA (14.83%). HOWEVER, the auto parts stores had a drag of a week. Big sector losers were Gold Miners and Platinum and precious metals--largely a reaction to the USD's strength. Here are the top/bottom performers (using sub-sectors):

Home Construction experienced a surge with KBH's good news. This sector is heavily shorted and the bears got caught with their hands in the honey jar. I created a chart book for you with the short interest and the weekly charts.

Let's take a look at the broad market index:

There is some negative divergence between the oscillator and the price action; however, the daily chart is not extended relative to the trend line. Earnings will be coming out soon and will feed the charts with new information. As we know, it is not the news, but the market's reaction to news that is instructive.

For your weekly research, I've prepared a chart book for you on the major sectors as well as some weekly change in price and short interest on subsectors. You may download it here (9.1mb).

Disclosure: I have no positions in any stocks mentioned.

740

2011-01-07T23:43:00.000-05:00

I'm not a snoop. I swear. But my daughter has used my computer to log onto Facebook, and the cookie must be there. I go to websites, and I'm recognized as one who I'm not. I can be a 22 year old if I like. But, I have no desire to be a 22 year old, nor the need to express my 'like' or 'dislike' at the touch of a button. Such is the power of Facebook and other social venues that relieves us of the ability of thinking about or countering 'stuff' with well-considered points and counterpoints. Why bother? Just click an f'n button for goodness sake. Take a shortcut.

I'm not on Facebook. My daughter, who is 27 years younger than I am, has 740 friends. I only found this out because it was staring me in the face on my computer. I might have 7 friends. Of those 7 friends, there are maybe 2 that I would confess my darkest secrets to, but I'd split them up. It is never a good thing to tell any one person all your deepest, darkest secrets. One must have proper diversification.

740.... It is a staggering number in its breadth. It is the metric of voyeurism that we have now achieved in our society where anyone with some passing molecule that abrades against our own in cyberspace is our 'friend.'

Last evening, I spent the evening with my girlfriend's family. She's my friend of 34 years. Her father is dying. She now lives in Northern Virginia; so I don't see her much. She is down to help her mother and sister care for their dying father.

I took some food and wine by. But we always catch up once a year, and it is always as if were were 17 again. We sat by the table--she, her mother and I. Her sister, 10 years younger, came by a little later. I told these people, who I have known since I was 16, how important they were to me in my life. They were kind to me when my home life was in tumult, and I needed their kindness. Their kindness was, in fact, a life preserver.

Their father, a wonderful man, who loves his family, so full of life and joy, is now so weak he cannot get out of bed. He has metastatic liver cancer, an unwelcome residual from his prostate cancer ten years ago.

They woke him up, and I was able to visit with him briefly. Still handsome: his face was smooth, and his white hair thick. I told him he was still the most handsome man I knew. I meant it. I held his hand, kissed his brow and stroked his hair. I thanked him for being so kind to me when I needed kindness.

Another dear man in my life who is 90 is also nearing the end of his life. I helped him write his obituary. We spent the a couple of weeks trading drafts--to say it just right. To codify a life of 90 years--a life filled with accomplishment and joy--to just a few paragraphs is an impossible task. But it is a process with deep meaning, great vitality and appropriate reverence, as it is the honoring of a life by giving voice to just a few highlights--reminder that our lives are to be lived rather than recounted.

Both of these men were influential in my life beyond my ability to measure much less say. Both are slipping away, as we all must do in due time.

I don't have 740 friends. I may not even have 7. But these two men are quite dear to me--being an influence and support in my life when it was important. I will not have the regret of having these two pass from my grasp without grasping their hand and kissing their cheek and telling both how important they were in my life.

The frontier of friendship has no horizon anymore. Oh, I have on-line friendships, and I cherish them. But even then, it doesn't approach 740--or a one-tenth of that.

If acquaintances are now friends, what is friendship? Who are friends? Friends love you and forgive you. I don't think that anyone has 740 friends to love and forgive them. And in return, you love and forgive your friends. You'd need a bountiful cup to love and forgive 740 people virtues and follies. If you can't...well, they are relegated to acquaintances.

I'm happy to have a few friends. I'm blessed to have had people in my life to mentor and inspire me. I'm sorry to have two friends who are holding tenuously to life. I'm honored to have known them. I'm thankful that I shared my appreciation of their friendship with them. And best of all, there were no shortcuts. The badge of friendship is earned with compassion, understanding and forgiveness--and sewn with the threads of tears and laughter. There are no buttons to press to convey those important things. There are no shortcuts to friendship. And when they slip away, the pain we feel is a reminder of their authenticity.

There is no greater charge in life than stepping up when asked the question: Who can you be a friend to?

Weekly Sector Report | 12/31/10

2011-01-02T10:40:00.002-05:00

The last week of the year saw the broad market index eek out a .03% increase. However, we know that the action is in the sectors, so let's see which cylinders are firing in the market's motor (click on all images for enhanced viewing):

Basic Resources, Oil and Gas and Telecommunications were the winners. Healthcare, Personal and Household Goods and Travel and Leisure were the losers for the week. Taking a look at subsectors, here are the 10 top/bottom performers:

I was interested in the Mobile Telecommunications sector's performance. There are some interesting chart set ups in that sub-sector. I created a chart book for you with the Communications Equipment tickers which you can find here . You can also visit FINVIZ to get a deeper profile for the names in this sector by clicking here.

Short Interest: Here are the sub-sectors with the highest short interest. Note that short interest is updated 2x per month.

To close, I want to present a chart of DWCF, which is the Dow Jones Total Stock Market Index...it includes all US listed stocks that have a readily available quote. You can see a linkable version of this chart here.

I created a chart book for you, which you can access here.

Best wishes for the New Year!

Beginning Anew | If Not Now, When?

2011-01-01T14:33:00.001-05:00

A New Year! And conflating the first two words, we get, "anew."

–adverb
1. over again; again; once more: to play the tune anew.
2. in a new form or manner: to write the story anew.

Source: Dictionary.com

The New Year is a natural demarcation line between the past and the future. However, it is worth noting, that the only "time space" in which we can take action is the present. There is not a thing we can do now to change the past, and whatever we imagine for ourselves in the future will not come to pass unless we take steps now to ease that unfolding. Our being more strong, happy, rich, compassionate, learned, skillful (pick your area) will not happen if we do not make the decision today to take action toward that goal.

In conversation with a colleague some years ago, he was relating to me a conversation he had with his son in making decisions. He then stated a very simple question he had posed to his son:

If not now, when?

Over the years, when I am tempted to dawdle, dither and defer--the three "D's" that contribute to the deplorable state of do-nothingness--I invoke this mantra. It has amazing power to spur action.

Our resolutions, then, are a time for us to begin anew. The product of our introspective efforts during this contemplative time requires three things.

Thing 1: Set a goal/objective
Thing 2: Concretize the needful things that must happen to reach our goal (identify what actions/steps are needed when).
Thing 3: Measure our progress toward achieving those steps.

I will add Thing 4: Adopt a reproachful mantra to chant when you are too tired, sick, bored, busy or stressed: "If not now, when?"

I promise you that if you invoke that mantra, you will empower yourself. As the queen of the three dreadful D's, dawdling, dithering and deferring, I can state that those words have real power. Yes, it is mildly coercive that question, "If not now, when?"

I believe that there is a range of people in life that fit with in the polarities of people who catapult themselves into action sans thinking and those who cocoon themselves within thinking sans action. I preach to you (and myself!) today as one who is occasionally rooted in the polarity of thinking sans action.

I'm not sure which is worse, action sans thinking or thinking sans action, but I do know this: Thinking + action = a higher probability of a successful outcome than either of the other two choices. Self discipline is the antidote to most of the ills accompanied by either of those polarities. Yes, this is a soap box post, but I am preaching mostly to myself.

I resurrected my resolutions from 2008. I consider these resolutions (revised date of 2011) a balanced scorecard for my life. Having turned 50 this year, I do feel that I've crossed (or tripped) over a threshold of sorts.

If you want to peek under the hood of those, you can do so here. It isn't finished, but I did want to share the idea with you. Woefully, I'm one of those people who requires a resolution under the category of "Fun".

The software that I used to create this list is FreeMind. You can find it here. It is free software, and you can download it at the link without fear of harming your computer. It is a simple, yet powerful program that will help you harness your creativity and transform your ideas into actions.

I wish you a Happy New Year--a year filled with successful transformation of your ideas into actions, and may those actions yield their intended consequences. And if not....may you have the flexibility and alacrity to adjust accordingly.

Winter Wonderland

2010-12-26T13:55:00.000-05:00

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 overfloweth...so energy expenditure is a good thing.

Weekly Sector Report | 12/25/10

2010-12-26T11:49:00.001-05:00

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).

Almond Toffee and Stock Picking

2010-12-24T14:51:00.004-05:00

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.

Weekly Sector Report | 12/17/10*

2010-12-19T10:33:00.001-05:00

The total stock market index ($DWCF on Stockcharts.com) 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 picture. Let'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.

Perplexed? Flummoxed! Creating a No Dithering Zone

2010-12-14T08:45:00.000-05:00

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.

Unconscious Incompetence
Conscious Incompetence
Conscious Competence
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."

Volatility Squeeze Candidate: PDO

2010-12-13T10:46:00.000-05:00

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.

Weekly Sector Report | 12/10/10

2010-12-12T13:36:00.000-05:00

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.

Weekly Sector Report | 12/03/10

2010-12-06T10:04:00.000-05:00

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.

Break Out the Snacks! J & J Snack Foods (JJSF)

2010-11-30T07:32:00.001-05:00

I was taking a cruise through the snack food universe (through the charts, not the grocery store aisles), and I found this pretty chart that I wanted to share with you of J&J Snack Foods Corp (JJSF) (click all images to make larger).

There is much to like about this name both fundamentally and technically (but see longer term chart below).

Technically:

Beautiful inverse head and shoulders pattern
clean breakout at neckline on good 2.33 x relative volume
clearing of volume@price overhang bars
caution warranted to wait for a pull back on the overextended price

Fundamentally (check them out on FINVIZ):

They have a quarterly cash dividend of .1175 up from .1075 (though I don't screen for that)
Recently beat on earnings
Great balance sheet (cash, good current ratio, no l-t debt)

I also like to take a step back and look at longer term charts. Let's look at a monthly chart:

Lots of happy holders in this name! However, the chart is approaching all time highs; accordingly it would be wise to look at valuations in addition to earnings growth as part of your due diligence to see if it fits with your investment theme.

Position: Watch list!

Weekly Sector Report | 11/26/10

2010-11-27T17:36:00.001-05:00

An interrupted trading week: interrupted by our American Thanksgiving tradition, some spit spat between N/S Korea as well as continued concerns about sovereign debt. The broad market index was down .61% with quite a bit of push and tug in the underlying sectors. Here's the sector summary (click all images to make larger):

Banks, Financial Services and Financials were hardest hit. With the USD strengthening in the wake of these concerns, Basic Materials and Resources also suffered. Retail stood tall, and the results of Black Friday will certainly impact this sector.

Let's take a look at the weekly chart of the total stock market index:

It was a light volume week due to the holiday, and the market continues to consolidate at this level. It is going to go one way or the other. Would that I had a crystal ball! Mine's in shards; perhaps yours is in better shape.

I want to point out the the lower part of the chart where I've consolidated two indicators (that show up on the detail charts). The purple dashed line shows the performance of this index for the time period shown (Jan 07- current). The broad market is still 20% below those highs. It is a cogent reminder that "not-losing" is the key to winning.

The market is gathering energy through this consolidation for a move. I don't mind being marginally committed (a/k/a standing aside) to see which way that might be. If the N/S Korean conflict and the sovereign debt issues get cleared, the move is likely to be up. If not, a pullback will be in store.

I've prepared a chart book for you which you can access here. It is a large file, so please be patient with the download.

Happy Thanksgiving!

2010-11-25T08:59:00.001-05:00

Of all of the holidays, none is more special to me than Thanksgiving. Sharing the bounty of the land with loved ones is a act of great love. I believe that cooks are the ultimate alchemists--transforming one thing into quite another. While we rely on stocks and broths to enrich our foods, those key elements were really nothing more than eking out the last bit of goodness from vegetables and bones.

Certainly any reading this is far divorced from a marginal existence; however, life on the edge is about getting enough air, nutrition and water to support life systems. Too many in this world live life at the margin. I often read in the blogosphere about how unfair the markets are and 'if only this, that, the other.' I find such lamentations surprising. As much as we would like to wish for life to be fair, it most certainly is not. Nevertheless, as individuals, we can be agents of equal opportunity 'fairness' on a unit to unit basis. A unit can be a person, place or thing: children, rainforests, animals, elderly or any of the other 'units' lacking needful things.

Thanksgiving is the holiday of gratitude. I believe that a grateful heart is a great, full heart. A grateful heart does not need things. Rather, a great, full heart has natural abundance, and within that bounty is generally a singular passion: to share that bounty with others. So much of the media, particularly the financial media, sputters with 'news' about how wrong things are. If our bodies are made of what we eat, then surely our minds are made of what we read, see and hear. The duty of 'fair and balanced' is not so much on what an outlet reports to you (after all they are still just trying to fill and sell advertising space), but rather YOUR acquisition and processing of it. I'm seeing a surprising amount of stuff so slanted and so oft-quoted (think of your favorite fear mongering site) that it seems to be taken at face value without so much of a whiff of discernment.

I still remember well my conversation with David, the frail, elderly, sharp-as-a-tack man that I met on my way to Las Vegas. Though physically fragile, he was passionate about staying engaged in things that interested him--investing being one of those things. (He was on the way to the Money Show!). I asked about the health of his wife. He said this to me, and it still resonates today: "I focus on the things that I still can do; my wife focuses on the things that she cannot do."

You think that I've run off the road and I'm in the weeds again, don't you? I'm meandering back to the path! My Thanksgiving wish for you is to embrace the notion of a grateful heart, and the bounty of a great, full heart. My wish for you is to delight in the sharing of that bounty with others. While it is is easy to focus on the bad--they do provide good 'stories', there is much to celebrate in this world and in the work of people interested in meaningful change. Seek out that balance of what is right in the world lest your heart and head become poisoned from the assault of what is wrong with the world.

Though we may feel powerless to change the ills of the world, we most certainly have the power to touch another consciousness in this life. That touch can alleviate hunger, isolation, fear, or physical discomfort--and it significantly changes the world for that recipient. Our Thanksgiving table, then, is a way for us to both celebrate and share. It is a time to reflect, too, on how we can extend the boundaries of that sharing in these times of great need.

My best to you on this important day.

Weekly Sector Report | 11/19/10

2010-11-20T13:31:00.001-05:00

The total market index was basically flat at .15% change. Within the total market, banks, other financials and utilities were the most notable underperformers. Below is a graphic of the 23 sectors and the total market index. (Click all images to make larger).

Let's take a look at a WEEKLY chart of Total Stock Market Index that includes the volume@price bars:

The markets continue to work off overbought conditions. As we saw last week, the market is still very fragile to news that surprises regarding sovereign debt. It is also worth noting that for the first time, bonds and stocks have diverged. TLT has fallen with a falling stock market. So while the flight to safety might be in the USD, it is not going into treasuries.

I have created for you a chart book with the daily, weekly sector charts in addition to the table of 148 industries sorted by performance as well as short interest per sector. It is a large file, so please be patient with the download. You may access it here.

Weekly Sector Report | 11/12/10

2010-11-15T07:28:00.000-05:00

The indices which seemed to defy gravity were reminded that Darwin's rule pertains to both apples and markets. In the DJUS industry universe of 148 (table included in report), only 13 of the 148 industries were positive.

To be sure it was a healthy pullback as the market was overextended. Whether it becomes something more than remains to be seen. There seems to be some issues with Blogger uploader, so I'm unable to upload images into this post. I regret the inconvenience.

You can review the full report here.

Weekly Sector Report | W/E 11/05/10

2010-11-07T09:31:00.001-05:00

The market showed no signs of fatigue last week. The broad market index was up 3.57% with a sweep of sectors positive across the board. Below is the Weekly Sector profile compared to the broad market index (in blue). (Click to make larger).

Note that the more defensive sectors, healthcare, food/beverage, utilities, are lagging.

Here's a chart of the broad market index (Click to make larger)

Prices are very extended and caution is warranted for longs. Prices are approaching a heavy volume@ price bar (which I have extended and placed in a dotted outline). It will be interesting to see how volume/price action react at these levels over the next few weeks.

To facilitate your personal study of the the sectors, I've created a downloadable PDF which contains detail sector information, summary sector information, and chart books for the summary sectors in both weekly and daily format. It is a large file, so be patient with the download.

CCM: Big Volume + Blue Sky

2010-11-05T14:12:00.001-04:00

I wanted to share a chart of Concord Medical Services (CCM). It is a Chinese ADR. From the company's website:

Concord Medical Services Holdings Limited ("CMS" or "the Company") operates China's largest network in terms of revenue and total number of centers in operation in 2008. Since its inception CMS has been committed to building an extensive network of radiotherapy and diagnostic imaging centers in China and employing state-of-the art medical technology to sustain lives and reduce sufferings. Today, the Company operates a network of more than 80 centers spanning more than 35 cities and 20 provinces and administrative regions in China.

They report soon, so any entries here could be dangerous. I had a small position in this which I increased earlier today at an advantageous price. Here's the chart:

Today was a significant volume day--with more than 400K in volume (v. 63K). For the price to advance, there needs to be sustained volume, otherwise gravity will work its magic. I like the fundamentals of this company (the sector and the technical set up). The company reports that cancer is the leading cause of death, and they believe that they are well positioned with their product/service offerings to capitalize on the trend to more accessible health care.

Naturally, the duty of due diligence is yours and yours alone.

Position: Long CCM at the time of this post.

Weekly Sector Report | 10/29/10

2010-10-31T10:56:00.000-04:00

We closed October without any of the oft-anticipated fireworks that define this transition month into 4th quarter. The total stock market index was up .13%--we can call that flat. Below are the 24 major Sectors and their relative performance.

As is usual, I have prepared a chart book in PDF form for your use with the weekly, daily, and monthly (since it is month end charts) for each of the sectors listed above. You can downoad it here. It's a large file, so be patient.
Below is a weekly chart of the total stock market index. I like to view this chart because it eliminates the bias of small, large, mid-cap, tech, industrials weighting that is evident in the other indices. I also like to look at the weekly to eliminate some of the daily noise.

We've a string of positive bars--9 weeks now. With elections this week, perhaps the market will give us its own version of the move 9 1/2 Weeks? As we've repeatedly seen, when the market gets to critical junctures, the news flow is the major impetus for the direction up or down--and last week was an example of much activity but very little direction although the sectors had quite a bit of push and pull (which is why I look at them).

Weekly Sector Report

2010-10-24T12:26:00.000-04:00

Another week marked by some sector rotation juiced by a strengthening dollar. Here's a graph of the major 24 sectors (CLICK!):

Travel and Leisure's oomph was due to the strength in Airlines, the highest performing industry.
Here's a chart of the the Total Stock Market (CLICK!)

The last rally that formed the top of the much hyped head in a potential H&S pattern developed over a period of 8 weeks prior to correcting. We've just completed the 8th week of consecutive, positive weekly close on the broad market. With earnings season upon us, watching how the market responds to news will be important. The volume over this last 8 weeks has been lower than the previous run up to the last high as well as volume from the same time last year. While I'm not making any predictions, I would surmise that given this run up combined with the overall overbought nature of the market, there is vulnerability to negative news.

Let's also take a look at the sectors that have the highest short interest (data courtesy of FINVIZ):

As is usual, I've created a chartbook for you. You can find it HERE.

CHGS, SHZ : Two stocks with huge moves

2010-10-21T09:16:00.001-04:00

I mentioned CHGS in this post. In that post, I mentioned that I had sold 1/2 of the position in the ramp and that I would re-buy if it pulled back in. Time passed, and it didn't pull back down below from where I had sold it. Accordingly, I bought back into it...in a greater size than what I had sold. Yesterday's surge was unbelievably wild. It is also an example as to how stop losses on the speculative plays can shake you out before the move gets going.

Here's the chart (Click!):

First, note the dip before the enormous break. If your stop was too tight (10%), then you may have easily been shaken out before the rocket boosters engaged. Speculative plays require speculative positioning (capital allocated). I did not have a stop on this as I had my capital allocated accordingly, and I believed that with the technicals and the fundamentals, I had a low risk entry.

Second, I was lucky to be at my desk yesterday rather than at a client. When the rocket boosters deployed, I systematically went into action--selling methodically into the lift. I marked in fuschia the prices that obtained. This audacious move with huge pockets of gaps was on 46.5x relative volume.

I currently continue to hold 15% of my position, and I may add to it. I'm interested in seeing the price action after absorption of the previous move. For every buyer, there is a seller, and I have more to say about that a little later. This stock may very well go to the moon, and there was definitely a moon shot yesterday--but one has to ask about the sustainability of such moves.

There was other robust activity in Chinese mining concerns, SHZ being another case in point. Let's take a look. Here's a 30 minute chart of SHZ (Click!). I do not own it, but I did look and pass on it!

This stock rocketed up on 150x relative volume. Wowsa! What is interesting on this stock is that the move was not materially sold down as with CHGS. I wanted to briefly share my view of "why" with you. Let's take a look at two weekly profiles with the volume@price bars. No, you will not need coffee to stay awake. (Click!)

Zooming out to a weekly chart, we see two very different profiles. For CHGS, there were lots of eager buyers from 09/09 through 03/10 that may have taken their eye off the ball and did not get out. Yesterday's ramp was some salve on a money wound, and they became very motivated sellers.

SHZ was quite another profile altogether. The longest volume bar was cleared and there were no previous buyers at higher levels who would be motivated sellers.

I'm a firm believer of the importance of volume@price bars to understand the complexion of a chart and the stability of pricing a particular points. I don't use pivots on stocks, but rather I look almost exclusively at this profile which helps me spot strength/vulnerability in different time frames.

Our job as traders/investors is to find high probability trades, allocate appropriate capital, and manage the risk in these trades. I believe that V@P bars help inform that risk. To take this one step further, looking at the long V@P bar on SHZ's chart, where do you think that there will be some very motivated sellers? If the price falls back below the $4.00, there will be some nervous holders.

Position: Long fractional position of CHGS

Sector Report

2010-10-17T09:07:00.001-04:00

With this post, I'm re-committing to weekly sector reporting. However, this report is spanning from July 30, 2010, since I have to use a data starting point, and I'm too lazy to pull the data and enter them individually. I'll resume to weekly changes in the next submission next week. You can download the full PDF here.

Hard to believe that behind Basic Materials/Resources, that Utilities would be such an outstanding performer! I chalk that up to dividend yield in the face of declining interest rates.

Here's a chart of the DJ Total Stock Market Index (Weekly Format) with the Volume profile. I placed a yellow highlight over the next longest bar.

Chart Notes

2010-10-09T09:05:00.000-04:00

I wrote about BTM here. I elected to take a position because I like the chart set up.

One holding that I have that I lightened up on is CHGS. Here's a weekly chart (click to make larger):

I sold 1/2 of my position into yesterday's surge of 25% with 18+ relative volume. Who's buying? Who's selling? What news? (I couldn't find any!) I plan to rebuy that 1/2 when (IF!!) it pulls back in. If does not pull back in, I still have a nice entry point, and I will enjoy the ride.

As you can see by the volume at price bars on the left of the chart, there are a few folks that may want to unload as (IF!!) this thing rockets ups further. However, if it can clear $1.80 per share, there's a nice gap in the volume@price bars that my create an airlift vacuum.

Or, the damned thing could sputter to the ground. It is not unusual to see "spikey" activity before a meteoric crash and burn. There are some nice fundamentals here that give me some confidence that is not to happen.

TRIT is another holding that I wrote about it. It also enjoyed a good day. I did not sell my position into this ramp. Here's a weekly chart (click to make larger):

Volume@price bars on this chart point to some resistance ahead.

My preference is to look at homogenous groups (sector, country). Because I have been a lazy toad in not providing the weekly sector information (which I will resume next week), I did create for you a China chart book. The charts are in monochrome so that you can print them out and study them. It's a tool for your due diligence. I hope that you find it helpful. It is a big file....So be patient on the download. You can download it here.

Blog Stuff and a couple of charts

2010-10-07T21:42:00.000-04:00

I cannot believe that I let the 4th anniversary of my blog pass without mentioning it! It has been a lonely wasteland of a place here of late. The good news is that I've recommitted to my exercise plan. You can read about that here.

While I abdicated doing my sector charts because Finviz had them, I'm going to go BACK to providing my sector reports. The PROCESS of putting that together, helped me feel more centered on the market. I'll resume that not this weekend, but next weekend. I was feeling like my work was redundant (which it is) against FINVIZ.

Seems like the market is dominated by currency wars (fisticuffs?) I'm not sure how any of it gets sorted out, but if we'd best keep half an eye on interest rates and half and eye on the USD levels.

I was wandering about in the foreign telecom sector. I wanted to share a couple of charts with you.

Here BTM. It has an interesting Volume by Price profile. It has been a laggard in the foreign telecom area, but this set up looks promising.

I have no position in this, but I like this set up quite a bit. Notice that if price can clear the top of the volume bar, there are few sellers lurking above. Lots of accumulation over this period and at this price level. As you know, there are no sure things (except that there are NO sure things). But it's an idea for you.

While many are talking about gold being parabolic, take a look at this parabolic chart that you didn't hear anything about!

I don't own this, nor am I suggesting it as a buy, but it was a nice parabola! As you might surmise, as with most of these telecoms, the dividend made it very attractive.

TNE is another interesting chart:

I'm not thrilled about the fundamentals, but there is some volume coming in, and it might be worth putting on a watch list to see if it can make some more progress.

I don't own any of these, and BTM is the chart pattern that I particularly like. Not much exposition here, so I'm sorry for my laziness. I just wanted to throw a couple of charts out.

Here's a photo opportunity that my son alerted me to today--a garter snake on a shredded Busch beer can.

CLDA

2010-09-21T09:10:00.002-04:00

Quick post on an interesting chart, CLDA.

What I like about it...

Price has cleared a significant Volume by Price

Volume is constructive over the last 10 days...but more volume needs to come in to push it forward

It is solvent (but not profitable) and has already had a recent public offering.

Revenues are growing

What I don't like about it...

It's a biotech and subject to the vagaries of all biotechs.
It is not profitable, so there is a cash burn.

Charts like this in industries like this have to be allocated risk capital. (Click to make larger)

Position: None

Notes from my life: Slopefest II and Francis Marion National Forest

2010-09-20T09:09:00.002-04:00

Mark and I traveled down to Myrtle Beach to meet some trading friends from The Slope of Hope. As part of my trip and my re-dedication to exercise, I spent a bit of time researching the parks down there for opportunities to mountain bike. I found a virtual treasure trove of opportunities at the Francis Marion National Forest. Because neither of us are bike-fit (as we USED to be), we did some warming up about 3 weeks prior to our trip, and we chose a trail that would allow us to enjoy our ride without taxing us too much. We chose the South Tibwin trail. It was a good choice.

This trail is shaded, a feature we appreciated in the 85 degree weather. The trails meander through a quiet wetland area. Though we doused ourselves liberally with bug spray, anytime we stopped we were attacked by voracious mosquitoes. If you have forgotten your bug spray...get some....industrial strength.
The entre in to Fall is a cue for our spider friends to build elaborate webs. This fellow (writing spider) not only crafted a wondrous web, but was pretty spectacular himself. While this photo (mine) might send some shivers up the spines of readers, writing spiders are non-poisonous. Look around your outside and find some of their artwork.

As part of my research into our foray into the forest, I wanted to ensure that I understood the wildlife in that habitat. Not only are there 5 kinds of poisonous snakes, but there are also alligators. Yes, alligators. I've not really thought about alligators and South Carolina as a pair. While neither of us wanted to run across a snake (though we are well-used to them in our area, I'm still frightened by them), we were hoping to see an alligator--from a safe distance.
We put the clip pedals on the bike, and put the clips on my shoes. I've not ridden with clips on my shoes on a while. They certainly make for more efficient pedaling. Unfortunately I managed to lose my balance while I unclipped my left foot, but my bike fell to the right. There's not a thing one can do but go with the flow. I have a bruised inner and outer thigh, just above the knee and an epic sized bruise on my right buttock--a deep bruise going all the way down to the bone. Not the kind of souvenir I was looking for!
Here's an on-bike camera shot of the typical trail:

Here are some of the vistas:

We did see our alligator...a small fellow who was floating vertically in water--his head just above the water, his arms floating just below the water, and the balance of his body hanging down. I estimate that he was 3.5-4 feet long. I did not have a telephoto lens with me so I had to blow this up from the 'speck'.

There was also a place on the trail--a trail covered in vegetation, that had a horizontal width of nothing but bare ground--about 8 inches or so wide. We surmised that this must have been an animal crossing (otter, gator, beaver) of some kind where some body part (tail) consistently drug often enough to prohibit vegetation or leaf fall accumulation.

We also spent some time with our GPS (GarminGPSmap 60CSx) using some of the features that we've not used before. My husband uses it when he goes to Hatfield & McCoy in West Virginia for dirt bike riding. I've not used this gadget much, but I worked with it--particularly the on-line interface. It was satisfying to understand the device's features. There's nothing interesting about the following picture other than I could do it (and I'll likely look back at this!)

After our biking, we elected to continue south on 17 to see other areas of the park. All in all, we drove 147 miles (measured from our Myrtle Beach departure). Thankfully, we had stopped in the Seewee Visitor's Center to purchase a park map which had all of the forest roads. It was the best $8 dollars I had ever spent. Please be sure to visit the center, purchase some merchandise and make a donation. I did all three! The forest roads themselves would be just perfect for riding one's mountain bike (and the map is indispensable--like insect repellant). As the trails crisscross these roads, one can mix up the ride. We did see a forest worker down one of the roads. He was very friendly. He had been bush hogging the trails It has been very dry down there, and he was telling of a trio of cottonmouths lurking by a small bit of water (that was normally MUCH larger) that was serving as their sushi (tadpole) bar. They slithered away as he approached....he said this to emphasize that most of the reptilian wildlife would just as soon avoid you as much as you would wish to avoid them. Though we did not have a snake bite kit, it would be wise to bring one if you are hiking through on a long trail. The ground was not always visible where we were riding, and one place was so obscured we decided that prudence was the better part of valor.
We will be planning a trip back, and I cannot wait.

Attending Slopefest was what made Myrtle beach our destination. Our exploration day was long, and we were unable to get back by 5 p.m. for the happy hour just prior to dinner at the LIberty Steakhouse. Tim Knight came by to surprise Slopers. I knew that Tim would be attending, and I would have liked to see his arrival. Here are a couple of pics from that. Look at those shameless wimmin' fawning over Tim!

Here's a pic of me with my Sloper friends, and one of TK and me. I believe that the look on my face is from Tim donning his "Love Doctor" persona--dispensing advice to a fellow Sloper that I took some issue with!

And here is a singular pic.

It's great that people travel to these things. Some come alone, some come with intrepid spouses or other family members. But SlopeFest is about friendship and community. It is a great way to meet fellow traders and to celebrate our connections with others. I'm really grateful to have such great on-line friends--and going to Slopefest was a great way to nurture those important friendships.

A couple of Chinese Lazarus Stocks: WH and CHNG

2010-09-09T17:54:00.003-04:00

Readers know my fondness for Chinese stocks. They can surprise and delight to the upside and and surprise and dismay to the downside. Here are two stocks that I've mentioned in this space previously: WH and CHNG. Click on all images to make larger.

First, let's take a look at a chart of WH, a Chinese tubular steel manufacturer who sells to the oil and gas industry (and has been recently hit by tariffs and the mini implosion of E&P stocks).

This stock has been in a steady decline. No, I did not have a stop loss on it. I seldom put stop losses on these speculative stocks due to the large shakeouts that occur. Hold your admonitions. That is my decision based on my consideration of my risks (and I size my trade accordingly)...your risks can and will vary, so make your own considered judgment. WH has had a remarkable rise on remarkable volume over these last few days--rising 50% from 09/03 through 09/08. It has pulled back in a bit. I'm not adding, and I continue to hold my position.

Second, let's look at CHNG, a Chinese compressed natural gas concern.

CHNG was taken to the woodshed and soundly beaten for not disclosing some debt. I figured that the stock had priced in the bad news (which to my eye and ear was more of a qualitative issue (trust) v. a quantitative issue). I held this in two accounts. I closed one position for a nice profit. The stock has a 13% short interest, so that's a little bear kindling when news surprises to the upside. There is much to be cautious about in both the fundamentals and the technicals; buying at these extended levels is risky.

On a different note, I literally stumbled across the the following chart of CBST to share. I do not have a position. It is setting up for a volatility squeeze. This stock is fixin' to get ready to go someplace.

Post Cards from the Edge: Market Shamanism

2010-09-04T12:21:00.000-04:00

This post is a re-tread from my blog. I posted this originally in April, 2008. This represents a generic piece that I wrote to ground my thinking. With some much editing, I thought that it might be a nice piece to share particularly in light of Tim Knight's recent post, though I've been trying to re-edit this thing for a while. I apologize for the length. The genesis of this post was from a reader's comment about what to follow to divine stock market movement--on what basis are we to judge the direction of the market?

As market participants and technicians, we are shaman-like in our quest for determining stock market direction. Our technician's tools are our talismans: we shake, rattle and roll the various chicken bones we lovingly call our indicators; we raise our moistened finger to see which way the wind blows; and we gaze wistfully to the horizon to see whether the clouds are fair or foul. To supplement our efforts, we look thoughtfully upon the past and what the ancients said and thought. Market Shamans... a strange, but apt, metaphor I think for our attempts at market divination.

Carlos Castaneda went on a peyote-inspired walk through the desert with his eyes crossed to find "truth" somewhere in the field of his overlapping vision. Technicians employ a number of means to do the same. The complexity of the layering of divination tools (a/k/a indicators) combined with sentiment, insider buying/selling, cycles, eclipses, and Mercury retrogrades! has the capacity to produce conflicting signals leaving one standing in the desert of indecision with one's eyes permanently crossed (just as our mothers warned). Perhaps there is a chicken bone or two poking a hole in one's pocket or in a tender area (or two!). I'm not arguing against these technical talismans, but rather cautioning that at some point one saturates oneself with so much information that it is an overload and may not produce clear signals for action. Esoterica, while pleasingly seductive, can occlude our vision.

Nevertheless, that desert is one that every technician/trader must wander. And while 40 days is significant in religious texts, aspiring market technicians will need more than 40 days of quality desert time to cultivate their skills and develop their insights. Insight. Think about that word for a moment (courtesy of Dictionary.com), and I'll get back to it upon the close.

There are many systems, simple and complex, that a technician can avail her/himself to. Oftentimes, there is a sense that the more complex and esoteric a system is, the more accurate it must be. We expect our prophets of market direction to have access to a powerful knowledge that is not in the hands of us mere mortals. The only esoterica worth understanding is that markets follow not so much reality but the perceptions of reality by market participants evidenced by the each day's volume and price prints. We know that there is a large disconnect between the two. If our technical tools are applied to fickle perceptions, how can we expect, much less demand, precision--both of which are voiced frequently? Our modern tools developed for MEASURING historical market data, do not have any power for FORECASTING market direction. It is for us to have an understanding of what the probabilities are of one direction over another. And while there may be a 75% probability of x happening over why, there is a 100% probability that only one of them will happen.

I believe that money, like water, seeks its own level though there may be wide swaths of disparity for uncertain durations. I believe that the following things matter a great deal: macro economics, an understanding of intrinsic and extrinsic value in stocks, business/debt cycles, and market participant psychology as well as our own psychology. The market, as with ourselves, is trying to divine the future. It uses its own talismans, technical, fundamental, sentiment all cobbled together to form some sort of roadmap. It does not have all that great a record at forecasting or pricing accurately, but it is constantly seeking price discovery. It is voracious in gorging on a steady diet of news--some of which gets digested easily, and some of which results in a smelly gastronomical event that defines our significant bear markets.

Our market participants are all manner of smart, experienced and successful folks: inflationistas, deflationistas, bond vigilantes, gold bugs, bulls, bears, value investors and contrarians, each believing that they have some special understanding that others simply don't get. Realistically, they cannot all be right at the same time. Ultimately as technicians, in the purist sense, we are merely spotting the consequences of their money actions v. their espoused opinion by noting three things on which we can incontrovertibly rely: quantity and allocation over time.

Strong trends get weak and weak trends get strong depending on a number of quantitative and qualitative factors--none of which we have control over. Nevertheless, some still demand that our charts forecast the future. When the future 'promised' by a chart set up evaporates, there is a broad lament (by those who are caught wrong-footed), "Technical analysis has failed." It is not that technical analysis, but rather that we have failed in our understanding of its limits. But even though limited, technical analysis has a great power. I believe that power lies in giving us a means to cultivate our market insight.

Technical analysis is the language (or music if you are more romantically inclined) of the stock market. Justin Mamis tells us that the market is always talking to us, we merely have to understand what it is saying. Our technical indicators--our understanding and application of them--help us tune into the market. For any of you who have built a complex worksheet model, you understand that having to reduce something to complex to a mathematical model requires you to really understand your subject and the underlying interrelationships among the parts. An artist 'sees' what many of us do not see. Try to draw (or photograph) your cat or dog. I guarantee you that you will 'see' your subject differently. Therefore, our indicators are not predictive tools, but our venue for gaining insight. It's through the application of our tools that we 'see' what the market or our stock are doing. It is through our experience with this careful application, our missteps, mismanagement, and success that we build insight. While the tools (mechanics) are the same for everyone (just as a camera, hammer/chisel, paintbrush are the same for all artists), the results of their application will vary. In other words, it is what WE bring to those tools that determines our level of success.

I used the shaman metaphor because of its ancient tradition of knowledge and insight. A shaman is very much in tune with the world in which s/he operates and understands well the journey through the desert. That journey confers knowledge and insight (wisdom). There are no shortcuts. Ultimately we need to ensure that our own eyes are not too crossed or our talismans too many and too contradictory that we cannot see the perils in the desert. And in most traditions, to truly see, one must first look within.

We are generally the impediment to whatever we are trying to accomplish in our lives (work, relationships, school) . Selecting our tools, understanding their use and limitations, practicing our techniques (disciplines) in applying those tools and evaluating our results are the foundation of building success in whatever venue we choose (artists, surgeons, market technicians, welders, brick masons). We must remain open to possibilities that others cannot see. We must understand that our tools are what give us access to discovery. Through discovery we build insight. Through insight, we build mastery.

TRIT

2010-08-17T20:32:00.001-04:00

Here's a quick chart of a stock that I own, TRIT. (click to make larger)

I have some technical and fundamental aspects of this name that I wanted to share with you.

TRIT had a terrific day, advancing 13.26% on 3.42 relative volume. There is some favorable air space above the current price action, but a big hurdle in the $14- $5 range. Caution is warranted here for any new entries as the BB% is over 1 (1.21 in this case), a largely unsustainable condition. I found this stock in a sector drill down. You might reasonably ask, "Which sector?"

When you poke around in places, you find some interesting things. This ticker shows up in three different sectors in three different places!

Stockcharts: Water Utilities
WSJ Industry Tracker : Industrial Goods and Services\Electronic & Electrical Equipment\Electronic Equipment
FINVIZ: Services - Technical Services - China (this is where I 'discovered it')

I like this company on both a technical and a fundamental level. I'm in at $9.17. It has been volatile, and it is, for most larger traders, too thin. I bought primarily on the chart, and secondarily on a 'cursory' view of the financial information. Here is what FINVIZ shows

At the time of my purchase it was a $9.17 stock of which $4.06 was cash. It has income, sales/income growth and no debt. It was worth a small flier. While FINVIZ lists the institutional holdings, there are two great places where you kind find this information.

My favorite place is J3SG. You can also find it at the NASDAQ site which also will list short interest over a 12 month period. The institutional sponsorship is very low. This low sponsorship does not bother me--I don't mind being in an undiscovered stock that gets discovered.

This ticker provided a good opportunity to show how a few things can come together with a little hard work on your part. Good research tools (charts/fundamentals), developed trading/investor skills, and penultimate organizational skills (to keep up with names to watch) represent of great trifecta to help improve your portfolio results.

Position: Long TRIT in my trading account.

Notes from my Life: Starting a New Decade

2010-08-15T14:21:00.004-04:00

As I approach my 50th birthday (today--technically 4:01 p.m. EDT), I'm feeling a bit as if I need to makes some resolutions. I'm not sure if 50 is the new 40. I am sure that I'm newly 50; and trampling new ground in old skin is not such a bad thing.

On Friday, I had lunch with a good friend of mine. It was not a the place that we had planned to go--that restaurant was on an August hiatus. We tried another restaurant, Mexican, thinking that a margarita on a hot day would be quite nice. The restaurant disappointed in every way. Our margaritas were $11 a piece. They tasted like $2 margaritas. Nevertheless, our lunch was enjoyable because it was an opportunity to be with my friend.

Clearly getting older is the opportunity for our friendships to grow deeper and richer.

I started a Fit by 50 blog two years ago. I am 50, but I'm not fit--my own fault. Lack of motivation and discipline. Failing to boundary other pulls on my time. Enough self-flagellation.

I awoke this morning to the Hound of the Baskerville wail from Macy. We thought it was the paper man. Rather, it was someone planting flamengos in my drought-stricken front lawn. Thank goodness Mark looked before opening the door for the dogs!

The flamingos are courtesy of my two good internet friends, Iggy and Viscous, from Slope of Hope. It does look like a birthday greeting meant for them! I'm not sure when they come back to gather the flamingos. I need to ensure that my dogs are in!

My family is given over to much distress about what to get me for any type of present. My daughter, who does not suffer from this paralysis, always manages to stumble upon the right thing--not only for me, but for every family member. She found in an antique place the following print:

It's a photographic engraving of Thomas Blinks', The Rose. It is printed by T. Ross and Sons and copyrighted by Moss and Tooth and Sons. The frame has been harshly treated, and in general the print is not in good shape. However, for all of its blemishes and age, it is still beautiful. It is going to look just perfect it my office, and it is a gift that I will cherish forever.

My sister sent me a stunning vase of flowers. They will delight me all week.

Tonight we will do a low key dinner at a Mexican restaurant.

Half a century....Truthfully, I don't feel any different than I did at any other time in my life other than each year I'm more comfortable in my own skin.

Weekly Sector Report | Week ending 08/13/10

2010-08-14T12:27:00.011-04:00

(Note: Please click on all images to make larger)

It was an ugly week in the market with the Total Stock Market Index down by 4.2%--Ugly if you are a bull. It was a fantastic week for the bears. Telecommunications was the sector down the least. As you might guess, the search for yield is on again, and some telecommuncation issues are staid dividend payers. Though outside the scope of this post, past dividends do not always equal current dividends. Make sure that you conduct reasonable due diligence to evaluate the quality and ability of continuance of dividends.

One of my long-time blog friends, MarkM, pointed out that preferred shares were a superb performer. Here's a chart of PFF.

Here are the sectors with the highest relative volume. You can view the entire table here.

ZBB and DYN were the two biggest contributors to this sector's relative volume performance.

Here are the sectors with the highest short interest. You can view the entire table here.

If you wish to scroll through all of the sector charts and drill down for greater detail, you can do so by following THIS LINK.

Weekly Sector Report | 08/06/10

2010-08-08T10:21:00.001-04:00

Last week I indicated that I would not provide the weekly sector report in the future. Given the feedback, I've elected to continue in a modified form--I will no longer prepare a chart book since this information is available on FINVIZ. I'll use this weekly post to highlight points of interest and to give you some links.

While the job report delivered a disappointing number on Friday, the weekly sectors, except for banks, were positive. Healthcare (+3.17%) and Basic Resources (+4.13%) had strong showings. It is worth noting that Healthcare has been the worst performing sector over the last six months.

Here's a table of the sub-sectors that have the greatest short interest for the week:

Source: FINVIZ

Mylan Labs (MYL) has the largest short interest at a whopping 25.27%. Click on the ticker to see a chart.

Now let's take a look at the sectors with the highest relative volume:

(Source FINVIZ)

The largest relative volume mover (4.51) in Medical Practioners was Transcend Services (TRCR).

For easy to view charts on individual subsectors, click here to be transported to FINVIZ. You can order these charts in a number of ways.

I hope that you find this new format helpful in providing an overview in addition to giving you some exposure to tools that can aid your own variation of research.

I wish you good trading this week.

Weekly Sector Report | 07/23/10

2010-07-24T22:29:00.003-04:00

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.

The Emotions of Risk

2010-07-21T08:59:00.005-04:00

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 that...to 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 believe 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

Notes from my life

2010-07-18T10:24:00.001-04:00

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:

Weekly Sector Report | 07/16/10

2010-07-17T09:57:00.003-04:00

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)

Weekly Sector Update | 07/09/10

2010-07-10T11:10:00.001-04:00

(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.

Time Frames

2010-07-06T09:04:00.000-04:00

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

http://www.j3sg.com/

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.

Weekly Sector Update | 07/02/10

2010-07-05T22:11:00.002-04:00

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.

Notes from My Life: Canoeing on the Upper James

2010-07-03T09:50:00.001-04:00

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.

A Look at the Total Stock Market Index

2010-06-30T23:44:00.005-04:00

Tough day in the market for bulls--even bears. Seemed like both were playing chicken today. Looks like the bulls swerved down a cliff towards the end. Below is a chart of the total stock market index.

The magenta represents the volume by price bars. As you can see, we are in tricky territory. We have dipped below the February 5 low. The market is literally at the edge of a precipice here. I've no predictions about which way it is going to go. It is reasonable to expect a bounce--but the news flow will need to be supportive of that.

Ka-CHNG

2010-06-28T10:47:00.000-04:00

On Thursday, I took a position in CHNG at $7.48. It promptly went down to $7.17 or so. Thankfully, I did not see it! No, I did not have a stop loss. With a volatile stock such as this, I often do not use stop losses. I'm not saying that you shouldn't, but for some of these wild names, you can get shaken out before the move.

Let's take a look at the chart:

I thought that it was forming a nice pattern. I believed that the VbP bars were constructive, too. Of course, it could have gone down. I sold 1/2 of my position @ 8.06. I still have the other half in another account. I would expect it to pull in.

Weekly Sector Update | 06/25/10

2010-06-27T15:14:00.001-04:00

I have something wondrous to share with you: Weekly Sector Charts with a twist! I was up early this morning, and I had a thought noodling in my head. I was interested in what the short interest was for the various subsectors. I decided that I wanted to create (for you and me!) a sorted list on that.

For that I went to FINVIZ. I calculated the number of short shares (% of float short x float). I then multiplied that by the share price to come up with the market value of the float that was short. The table that I prepared had % of market cap short and % of shares short. I've a new/fast computer, and this process taxed the resources. I've included the report within my sector report. I hope that you will download the full report. You will not be sorry, and I guarantee that you will see some things that will surprise you! It is in PDF, and it is very easy to read. You can find it here.

Let's take a look at the Weekly Sector Graph. You do not have to adjust your screen. The 24 sectors are all negative. Only 5 of the subsectors were positive. The broad market index was down 3.7%. As usual, individual sector mileage varied, which is why I put these together.

[source: data from StockCharts]

Now let's drill down and look at the subsector 10 best/worst performers.

[source: The Wall Street Journal]

Notes from my life

2010-06-26T16:44:00.000-04:00

As my readers know, I do dog rescue transport. Shortly I will be leaving with husbando in tow (he does not do this with me). We will pick up two English Setter girls and take them on a short drive to Fredericksburg. They are heading for a pajama party in PA, and then will resume their travels tomorrow to their adoptive/foster homes in RI and CT respectively.

Our weather has been hateful, and I helped my regular transport out today at the handoff. The picture to the left is of some very young puppies from a transport about a month ago. It was a difficult transport because the mother dog was spooked. She grabbed a pup and did not release. He fainted. I thought he was dead. He revived quickly.

I'm happy to report that the mom and her pups were quickly adopted. I'm happy to know that my little bit of help along the way has these good outcomes. I wanted to share a couple of pics with you. Here are the pups romping happily at their foster home. The black and white guy with the ball is in the very top of the first photo. This photo just makes me laugh! Jaunty little pups!

Here is another dog, Cloey, playing tug of war with the pups.

And finally, here is Cloey, with Max, the black and white dog form the other two pics. Max was adopted into this home:

It sure made my day to get these pics. I hope that you enjoyed them too!

Wait, wait, there is more.

On Friday, I was able to visit with two of my dearest friends, Bill and Lynne. We had a leisurely day going to the Barboursville Winery (Palladio). I think that we laughed to loudly and earned reproachful looks from one table and approving looks from another. Well, WE had fun. These are the only two people in my life that can make me laugh until I cry. I was wiping tears from my eyes. Here's a pic of us freshly sated and saturated. Bill, Lynne, Leisa (l-r).

I don't normally have 4 glasses of wine during the day. Lynne was our designated driver. I went home and went to bed. Here's a few more pics. Here's a stylized pic of the flower pot.

Here's one of the two horses nearby. I remembered him from last year. His feet were in poor shape and needed trimming. He was a nice boy.

Now off for round two of today's canine duty.

Weekly Sector Report | 06/18/10

2010-06-20T09:39:00.001-04:00

The bears were on vacation like this ursine store fixture (but a real bear in his/her former life) at Bass Pro Shops. The store is a marvel, and I can report that there were no taxidermied bulls.

The broad market index was up 2.33% with Basic Resources, Basic Materials and Chemicals leading the way. Below is the graphic of the 24 broadest sectors in relation to the broad market index in blue.

(click to enlarge)

Underneath these 24 broad sectors are 148 subsectors as defined by Dow Jones. Here are the Top 10 winners/losers for the week.

Source: WSJ Industry Tracker

I have created a chart book with the weekly/daily charts that you can find HERE which includes the detailed list of 148 sectors sorted in order of performance.

Keep your trading wits about you and focus on your disciplines, not the opinions of others.

Weekly Sector Update | 06/11/10

2010-06-13T10:01:00.004-04:00

Somehow this sepia photo (mine) of the water bottle seemed to be relevant to current matters. My hope that it is not the permanent symbolism for the Gulf of Mexico.

Last week was a significant rebound in the 24 major sectors with basic resources leading the charge higher. The major indices are at a critical juncture technically. It's important to remember that individual stocks make sectors and sectors comprise indices. Accordingly, looking at individual sectors can yield clues about the indices. Underlying sector rotation can cause chop...and if the news stream starts a fire and flames the fears of investors, then the indices will put the those flames out by stopping, dropping, and rolling...OVER.

Let's take a look at the 24 Major Sectors:

You will remember that last week, that graph was upside down. I have created a chart book for you that you can find here. It contains the weekly + daily charts for the 24 Sectors above. Also, it contains all 147 DJUS sectors sorted by relative performance to the total stock market index.

For the week, the 10 Best/Worst performing industries were as follows:

Source: WSJ Industry Page

Next week will be a critical week as the market digests geo-political and economic information. Keep your trading wits about you and focus on your disciplines, not the opinions of others.

Feels like Summer...........

2010-06-12T18:21:00.000-04:00

A scorcher of a day in Virginia. I did my usual dog transport. (This is Macy, my dog). It was a miserable day for all of them...except in the cool of the a/c in the car. . . and the fact that they get to go to a safe place. Lots of nice dogs. We had two escapees--that were quickly nabbed. One slipped out of a collar and the other gnawed through a lead.

We see e-mails from time to time of dogs slipping from rescuers. Our group has never lost one. But we've been close, and it is just terrifying. Remaining calm helps and not giving chase.

This little pup to the right had 5 siblings... They went to Janet's Rescues in Stafford along with their mother. She runs adoption events through the Petsmart up there. The economy has made for a slowing adoptions.

I red convertible with two young women was ahead of me. It had a vanity plate: CUM GZLR

I was trying to figure out the "see you" angle, and then the reality of the plate hit me. I cannot believe that DMV let that one get by it. Though I'm no prude, that goes beyond the bounds of good taste. I realize now what I wrote, and I'm going to let it stand. Geez..

I will likely file a complaint, on behalf of all of the moms/dads of precocious spellers who are try to figure out those plates. "Hey Mom, what does that plate spell?" Oh, it says, "see you" ARRGGHHH, we need to exit here we need gas.

You cannot make this stuff up.

Weekly Sector Report: 06/04/10

2010-06-05T09:13:00.000-04:00

A tough week in the market for the bulls, but the bears were plenty happy. The total stock market index was down 2.52 %, and all 24 of the major sectors were in the negative. See the table below.

(Click to make larger)

For the more detail subsectors, below are the best/worst performing over the last week.

(Click to make larger) Source: WSJ

I've prepared a detailed report on the sectors, which you can download here. Make sure to adjust your pdf file viewer settings to see the charts clearly.

COST: Holding onto a Critical Volume by Price Bar

2010-06-03T22:09:00.001-04:00

Here's a chart of COST. I'm showing the Volume by price bars, extending the most critical VbP bar in pink.

(Click on the chart to make larger)

If it breaches that pink zone, there could be a significant air pocket below and a rough ride for those long this stock.

Position: None as of posting date.

WH: Successful Bounce Trade

2010-06-02T08:48:00.000-04:00

Because of my sector fetish, I look at quite a few stock charts. Because of my fetish with what I affectionately call 'boneyard' stocks (stocks off the beaten path and require careful picking through!), I have some names that I check on from time to time.

I've trade WH very successfully in the past. I decided to take a look at it and saw that it had been decimated. I picked up 2k shares @ $1.62. I sold them two days later (yesterday) for $2.08. I didn't think the surge sustainable. I'm also mindful of Dan Fitzpatrick's great advice to consider your gain with your length of hold.

My plan was to play the bounce. I was initially worried that the $1.85 level was not penetrated the day before. But that hurdle was cleared with impunity. I would consider re-entering on a pull back or some constructive consolidation. I will resist the temptation to whine if it gaps and goes!

I DO need to work on articulating a better trade plan. I generally do not list my planned trades here, and I try to limit crowing or grousing on good/bad trades except as there is a lesson worth sharing. As part of my blogging was to help me solidify my thinking by writing, might that not work for my trading as well!?

While I'm a very good researcher, and I think that I have a decent eye for charts, I'm reminded through my sub-par trading, that those skills still need some development and mastery. Perhaps in my fear of embarrassing myself through poor picks and poor timing, I will vet my choices better--a bit like preparing steak for a guest v. cooking myself a hot dog!

I'll wrap my head around that idea more.

Position disclosure: no current position as of this post in WH.

Weekly Sector Report: 05/28/10

2010-05-31T13:25:00.007-04:00

click on all graphics to make larger/clearer)

Last week was quite a rebound in the market with the broad market index advancing .52%. There was a notable rebound in many of the sectors. Here are the top/bottom 10 industries for last week. This information is available to non-subscribers at the WSJ Industry Page, which you can find here.

There is always a bull/bear market somewhere...just make sure that you are looking in the right places.

I've prepared for the the detail chart book which you can find here. Because it is month end, I also included the monthly charts. IN ADDITION, I created performance charts for all 24 Sectors! I think that you'll find them interesting because I started with March 1, 2009 through May 28. I've also included bookmarks to make this report more navigable.

If you are not familiar with performance charts, they measure the price performance relative to a starting place. Here's an example of a performance chart for the Total Stock Market Index from 03/01/09 through 05/31/10:

Note the volume by price bars. If we break down trough the yellow area, I believe that we could quickly cut through the blue area where there is little "price memory" in the market. The market did manage to gird it's loins and hurdle above its moving averages. I use the 13 + 34 exponential moving averages combined with the 89 day simple moving average. I have Osso to thank for the suggestion of taking the 89 day moving average from an exponential to a simple basis.

Melange Post

2010-05-31T09:55:00.000-04:00

I had a busy weekend. On Saturday, I overnighted Jonesy, the handsome lead English Setter, who is being trailed by Daisey and Ella. He also had a traveling companion, Shena, a female English Setter mix.

More about this picture in a minute.

These dogs are traveling to foster homes from South Carolina to northern destinations Jonesy was going to Wyncote PA, and Shena to the right. They were well behaved house guests, and my three girls (two pictured above) were very accommodating

I drove to Alexandria yesterday morning. It is a two hour drive from my home. It was a pretty day, and I passed many motorcycle pods going toward DC for the annual Rolling Thunder Motorcycle Rally. I didn't know anything about this until my fellow transport colleague from that area told me. I hope that you'll take a moment on this Memorial Day Holiday, to read about it. I hope that you will take a minute (or longer) to honor the memory of those who have fallen and to thank those currently serving or who have served in the past.

There were two bridges on which several people were waving (hands and flags) or putting up flags. They seemed genuinely happy to be greeting the faceless, nameless drivers proceeding beneath them. I imagine that today the bridges and the road ways will be more crowded. I'm happy to not be traveling them, but rather to be seated at my desk.

Regarding the first picture of Jonesy being followed by my two girls......Jonesy does not have a clue as to where he is going, yet he has two interested followers. Some market pundits sprang to mind. Draw your own conclusions!

Veterans! Thank you for your service.

Finding your Inner Blogger

2010-05-23T10:29:00.002-04:00

Most people think of blogging as very public affair. They would no more write a public blog than they would run naked through a crowded square. I'm writing today to encourage you to create a your own private blog. If you first shuddered upon reading that, I want you to re-read it. "Private" is the operative word. You can easily set up a blog on Blogger (and I presume other venues, but my experience is with Blogger) in such a way that it is private only to you. However, if you have Unibomber or Ted Bundy tendencies, then I would suggest to you that a private blog on the internet would not be a wise choice. Rather, I'm writing this post today for those of you who have slapped your head or kicked yourself in the tush because you had a market/trade idea that you let get away from you. Accordingly, I'm putting on my evangelical blogging hat, and I'm knocking at your door--politely and with respect--to evangelize the importance of writing.

One of my favorite authors is Jose Ortega y Gasset. I found this quote which resonated deeply with me, and I wanted to share with you:

"The so-called spirit is an all too ethereal agent, permanently in danger of being lost in the labyrinth of its own infinite possibilities. Thinking is too easy. The mind in its flight rarely meets with resistance. Hence the vital importance for the intellectual of touching concrete objects and of learning discipline in his intercourse with them. . . Without the check of visible and palpable things, the spirit in its high-flown arrogance would be sheer madness. The body is the tutor and the policeman of the spirit."

Jose Ortega y Gasset, Man the Technician (essay)

". . .the vital importance for the intellectual of touching concrete objects and of learning discipline in his intercourse with them" Is not writing the concretization of thought? If you find writing agonizing, it is with good reason. Writing is what ensnares your mind's flights of fancy and imposes order. Writing forces you to wrestle your ideas to the ground so that they become accessible, practicable and, most importantly, executable. Your writing is the score of your mind's symphony of ideas. When it written, it is memorialized and accessible to you for further tweaking. The process is not meant to be easy. The process is meant to be discomfiting enough because it forces you to make your thinking productive and actionable. No longer are your thoughts an ethereal agent. I would re-write (with great reverence to satisfy my own selfish purposes here), JOyG's last phrase.

(image above courtesy of Marlen Pens)

I will concede that some of you are tapping your toe and saying "No way!". You are a minimalist! You care only about your charts! Like all over- zealous door-knockers, I have an answer to that objection. A blog will help you post your charts and document your thinking. You can use labels that will allow you to post just your trade journal. You can upload your annotated charts, state your trade criteria and---most importantly--detail your post mortem. Perhaps your trade is so splendiferous that you want to memorialize it in its own special category. Add a tag! By simply clicking on your labels you can easily find all of your splendiferous trades. For a trade that went woefully awry, memorialize that one too with its own tag.

The blog serves as an image posting service too. Rather than posting random images, why not have your images inserted into a blog page (with your notes). You can share the image easily by clicking on it and posting the http address--you can share the image without sharing your post. How useful is that?!!

There is one more tool that I want to share with you. It is ScribeFire (an extension for Firefox and now Google Chrome). What I like about Scribefire (click on graphic to left to be transported) for Firefox is that it can be used as a split screen. This split screen allows you to seamlessly add stuff to it that you find on the internet that is interesting to you. it is easier than bookmarking 'stuff." Here's a picture

Still not convinced? I will head out your door after leaving you with this one last thought. If you missed my post on Finding your Inner Genius (Slope of Hope post), I hope that you will take time to read it. One of the characteristics of the great geniuses is their collective obsession with keeping a notebook with them at all times. I promise you this: Many of the great ideas that you have come to you will be lost to the ether IF YOU DON'T WRITE IT DOWN. The insight part of your brain works when you are not forcing it to work. Your having pen/paper or some other means of capturing the product of that insight will enable you to integrate into those moments when your brain is in forced labor mode.

Not only must you write stuff down, you will need to revisit your stuff...and revise, refine and revel in your own genius. You will write stuff so sublime you will hardly recognize it as your own work. You will also write stuff that will make you wonder how you could have been so stupid. With your private blog, your private stupidity is yours and yours alone--so there is no risk!

Imagine your brain's thinking as a river. Your ideas a collection of silt and gems. Your writing is your tool for prospecting that great river. Those jewels you can bring forth to the world to share--or just make them available to your conscious mind.

I will let myself out! Thanks for letting me evangelize a bit.

Weekly Sector Update | 05/21/10

2010-05-22T22:11:00.001-04:00

An unusual week where all 24 sectors were negative. In the larger list of 147 sectors, there were no positive sectors. An unusual and brutal week if you were long. If you were short, then it was manna from heaven.

You may download the full report here.

I also wanted to point out the sectors that have had a subsequent violation of the February low.

Health Care
Oil & Gas
Telecommunications
Utilities

Lessons in Living

2010-05-17T06:27:00.003-04:00

One of the things that I enjoy about flying is that I always meet interesting people. My trip to Las Vegas was no different. In fact, I had two seat mates that were anchoring both ends of the age spectrum and I was squarely in the middle.

From Chicago to Las Vegas, I was sitting beside David. He was an elderly man, 87. He remarkable in every respect. He was a WW2 verteran and retired just two years ago from his marketing firm which he sold to his daughter. His wife is still alive, but her range of activity is limited to a five mile area. He said that she often wishes that she would go to sleep and not wake up. I cautioned that she might be suffering from depression as she also has a chronic disease. He looked at me knowingly and said, "When you get to be a certain age, it is not an unusual desire."

I asked David why he was traveling to Las Vegas. "The Money Show," he answered. David was interested in learning about ETF's. In fact, David was interested in learning about a great many things. He was talking about the courses that he has taken from The Learning Company, and he had one in hand about how the brain worked.

Though physically frail, his mind was very alert and he clearly had much energy.This trip to Las Vegas was one of 90 that he had taken over the years. He had planned his trip carefully. He spent the night at a nearby hotel. He recounted how the couple next door made quite a bit of noise into the wee hours of the night, robbing him of some much needed sleep. He returned the favor by turning up his TV at 4 a.m.! He chuckled at his mischief.

He arranged for a wheel chair to take him to the arrival gate and had one waiting for him at the departure gate. I admired that this man still forged ahead, and I told him so. He then said something that I hope that I carry to my grave--it was something that he said to his wife:

You focus on all the things that you cannot do; I focus on all the things that I still can do.

If that isn't a mantra for living life fully, I don't know what is. I was flattered that he told me, "I thought this was going to be a boring flight--you are interesting." I hope that David enjoyed the Money Show.

Coming back, I sat beside a young woman just beginning her teaching career. She was young, effervescent and hopeful. I forgot her name already--though I'm quite sure that David would not have. But each of them book-ended a very pleasant trip where I had to the opportunity to meet on-line friends. It was also a reminder that our lives are not defined by what we accumulate in our lives, but who we accumulate into our lives and the strength of those relationships. It's a lesson that bears reinforcement, and my trip was a good means to solidify that life lesson.

Weekly Sector Update: 05/14/10

2010-05-16T08:32:00.005-04:00

The market had a bounce last week, with the DJUS Total Stock Market Index advancing 2.74%. There are 148 subsectors. You can easily see the top/bottom performers by going to the WSJ industry page.

Below is a 1 week performance view for the 10 best/worst performing subsectors (industries):

(data courtesy of WSJ).

You can find this information for a number of time periods, and it it updated daily. It's a great way to perform an end of the day review and wrap your head around the market action beneath the indices. I've created a full report of the 148 sectors sorted by weekly performance along with the weekly/daily charts of the 24 broad sectors here. You will need to rotate the chart pages counter clockwise for easy viewing.

My individual charts use a 13/34 period exponential moving average. I'm interested in the relationship of these two lines to each other (e.g. is the 13 moving toward or away from the 34?) and the relationship of price to these two lines. I included thumbnail sketches of all 24 sectors so that you can see all of them at a glance. Stockcharts uses a 20/50 moving average that is not editable in this thumbnail view. The same concept is at work though--short moving averages v. longer moving averages and the price relative to those. Currently all 24 sectors see price action below the 20 period and 8 of the 24 sectors have the 20 day below the 50 day.

Leaving Las Vegas

2010-05-12T16:12:00.003-04:00

Las Vegas will soon be a terrific memory.

Here's a picture after lunch at Noodles in the Bellagio, yesterday

Never have I been in the company of such handsome, charming, smart and funny guys. It was terrific to meet my blog friends from Slope of Hope. It felt like old friends getting together. I can think of few things in my life where I've been as much anticipatory of "something" and to have that "something" exceed my expectations. This 'something' was a special one indeed as my expectations were exceeded in every way.

I've been informed by my daughter that Macy, our American Bulldog mix, has not moved from the couch and is fixated on the driveway awaiting our return. The departure monitor warns of possible weather delays to Chicago. I'm keeping my fingers crossed, as I'm looking forward to getting home.

Did you feel like this?

2010-05-07T07:24:00.004-04:00

I remember the 500 point drop on the Dow a few years ago. That was a harrowing thing to watch. Yesterday at 2:46 p.m., I received a call from a client. I was watching the screen, I said, "The market is crashing as we speak." He graciously asked, "Do you need to go?" I didn't. I have no idea what I would have done, but I watched my SIJ which I hold in size in one account zoom up.

While on the call, I could see the market reverse. SIJ at one one point had both a bid/ask in a couple of pennies of $1.14--it had been trading. Here's a screen shot

Nasdaq has a list of stock trades that will get busted if it occurred within that 2:40 time frame through 3 p.m. You can find the list here.

I leave for Vegas on Sunday to meet Tim Knight, from the Slope of Hope, in addition to other of my on-line friends who are dear to me but who I've never met. Tim's blog was one of my first blog homes several years ago. I had the opportunity to help him out when he was in France. I appreciated that my blog still remains a personal space.

My husband will be accompanying me and he is scouting out some speed-induced thrills. My husband is an avid dirt-bike rider --still at age 54. Our last visit to Las Vegas, he did an 8 hour d-b ride in the dessert with a world class rider, David Dunn. Unfortunately, in looking to do that again, in search for David, I found his obituary. My husband's time with David that day "pegged his fun meter." So, there will be a bittersweet memory there.

I hope that your trading is going well, and that yesterday didn't wig you out too much!

Weekly Sector Report: 04/30/10

2010-05-03T08:50:00.007-04:00

Last week was a highly unusual week where all sectors were negative.

However..... in the more granular industries, here is a summary of those that were positive:

I regret that I do not have a chart book for you you on the 24 sectors. I had some technical difficulties with a new program that I'm using, and I'm quite unhappy about it. If you are an intrepid chart viewer, you can find the chart book of the 147 sectors in weekly/daily/monthly format. This report is more research weight, and it is 48mb or so. View it here...if you dare!

You can find the summary 147 sectors here.

Gold | Gold Miner Stocks

2010-04-29T20:37:00.005-04:00

As the world wrangles with trying to determine what is "safe", gold is yet again in the spotlight. I don't plan to tell you what I think that gold is going to do...but it is worth noting that the USD is up and gold is up. That says much.

I do plan to help you scout for some opportunities. Let's take a look at the chart of gold with an integral window of the metal divided by the gold miner sector. As you can see the ratio is sloping downward: miners are performing better than the metal.

And, for your reading enjoyment, I prepared a chart book of the miners for you. It is in weekly format, so that you can see a longer term view. You can download it http://www.box.net/shared/static/ozf2hn1rbz.pdf. Some of these names (see SA for example) are extended, so prudent trade strategies (e.g. do not chase) are warranted.

Positions: No stocks mentioned, but author is long GBG.

Utilizing Price by Volume Bars for Trade Strategies and Ideas

2010-04-27T20:40:00.001-04:00

I have simplistic charts because I have simplistic methods. I want to share with you a trade technique that I use that I've found to be very successful. One way to look at the complexion of a chart is to utilize volume by price bars. Before launching into more narrative, let me put up a chart:

A few key points:

The stock has made a significant relative high

The stock has traded in a 2-month range with very high volume during this time frame.

It has a 6% short float over the past couple of months.

When I look at this chart, I see instability in the current price range. If the chart were flipped, I would find that long volume by price bar as being very stable, and I've enclosed an example of that for you. At its current price range, this chart looks very top heavy to my eye. The short VbP bars are like an air pocket--a vacuum if you will. This stock price could hit that air pocket and fall to the $43 area quickly.

This might be a stock that you might consider putting on a watch list as it might be at or approaching an intermediate level to short. My point is not to recommend this stock as a short, but rather to demonstrate how looking at volume by price bars can give you a dimension of information that is not otherwise readily apparent.

Here's another chart, COST, that has another promising (VbP) configuration:

Remember, this set up works on the long side too. Here's a chart of FTWR, as stock that I have a long position in.

I want to share one last chart with you. It is a Renko chart. I posted a link to this chart back when I originally created it in September, 2009 of the NYSE composite. I believed the lack of VbP air pocket above would suck the price upward. (I note that I could have easily been wrong, but this chart was part of my 'weight of evidence.'

There are no sure things when we look at charts, but VbP information adds a dimension to your chart review that may help you see opportunities and/or hurdles that you might have missed without the volume profile

Position: long FTWR.

Weekly Sector Update: 04/23/10

2010-04-25T10:07:00.004-04:00

Below is the summary of the 24 Broad Sectors. You can find the detailed chart book here which contains:

A table of the 164 sectors sorted from best to worst performance
A graph of the 24 sectors (below), to show a visual of these sectors compared to the total market sector in blue
Weekly charts of the 24 sectors followed by
Daily charts of the 24 sectors

All data is courtesy of Stockcharts.com | Presentation is courtesy of me

Weekly Sector Update: 04/09/10

2010-04-11T08:16:00.005-04:00

Below is the graph of the Dow Jones (24) Sectors for the week ending 04.09.10. The broad market sector advanced 1.5%. For the Dow Jones (164) sectors, 136/164 sectors were positive--particularly strong were the basic resources sectors.

You can find the chart book of the 24 sectors here presented on a weekly and daily basis in addition to the full listing of the 164 sectors here. I want to encourage you to look at the individual chart books to include the ranking of all 164 industries because that detail has granularity that can be instantly absorbed. For example, the top/bottom 5 sectors were these:

(I see that I have 6 top sectors!)

By looking at the individual subsectors, you can pull charts of individual constituents and using your own TA methodology make some decisions about potential trades.

Market lore is replete with both wisdom and pablum. Unfortunately, some of us (me!) have to learn the hard way how to differentiate between the two. I subscribe to the notion that any stock pick that I have is going to be governed in general as follows:

This model is my mental model that serves as the core of my evaluative process. A few questions one might ask are:

The market and sector are weak, but this stock is strong. Why? (Could be exciting news such as an earnings report or a new product development.). There might be a long or short opportunity depending on your evaluation of the catalyst.

This stock is weak but the market and the sector are strong. Why?Maybe there is a short opportunity or perhaps it is in undiscovered gem. A cursory look into the matter might prompt you to put it on your watch list.

This sector is strong, but the market is looking weak. The market could be undergoing sector rotation. Indices may consolidate, but underlying sectors will shift up/down. Finding leaders within the sector might be helpful for identifying opportunities.

A very quick way to look a stocks is creating a ratio of the stock price to the sector that it is in. For the 24 sectors charts, I provide the sector information for you and it's relative performance to the broad market index.

Here's an example of a gold chart:

The bottom part of the chart shows THM's relative performance to all of the miners. Telling, isn't it?

I highlight these points is to encourage you to develop YOUR modality in looking at the markets and stocks within the market to make informed decisions that meet your risk tolerance and time horizons. When you have a well-developed methodology, then you are informed by the opinions of others, not influenced (read: derailed). I may be a slow learner, but it took me a few years to settle on my current methodology. It suits my style, and your mileage might vary. Test drive the cars that you need to and undertake the required care and maintenance to optimize your driving time.

Note: No positions in stocks mentioned by name.

All data courtesy of Stockcharts | Compilation courtesy of me.

Weekly Sector Report: 04/02/10

2010-04-04T09:39:00.003-04:00

With this report, I plan to migrate from a table presentation to a graphic presentation. I'm leading with the monthly change as we just closed a month. I have colored the total stock market index in blue so you can see that as an easy comparative. I hope you like this new format. Click on the image to make it larger.

You can find the detailed report here. It includes all 164 DJ Sectors, the weekly, daily and monthly charts.

Weekly Sector Report | Expanded View (W/E 03/26/10)

2010-03-27T12:57:00.005-04:00

Perspective is everything, and we gain perspective by comparing one thing to another. I wanted to build some sector and market perspective for you. How? By providing you with the following:

time series of when different sectors peaked¹
current retracement to peak in absolute terms¹
percentage decline from peak to trough
percentage of points lost retraced
percentage retracement to trough

¹ contained in Table 1 below

Table 1

There are a couple of things that are notable from this chart

It has been more than three years since the financial sector topped
There was 16 months from the topping of the first sector (Financials) to the last sector (Commodities)

The next table, Analysis of Sectors: Peak, Trough and Comparison to Total Stock Market Index (sorted by % gain from trough), will give you view of the sectors that have recovered the most since their trough:

Table 2

Now that I've provided you with that, we'll return to our previously schedule program. Below are the 24 Summary Sectors. You can find the complete report on the 164 DJUS Sectors in addition to weekly + daily chart books for the sectors below here.

I hope that you found this expanded report helpful to providing to you some perspective on relative time and price performance among the 24 sectors that I highlight for you each week. You can also see the disparate nature of BOTH time and price performance through a major cyclical decline and recovery. While this information is unlikely to make interesting cocktail conversation, it is a useful mosaic of information to inform your investing/trading thinking.

I will post periodic updates to the peak/trough tables.

All data courtesy of Stockcharts.com | Compilation and analysis courtesy of me.

Market Wisdom by Selden

2010-03-24T07:26:00.001-04:00

I wanted to share one of Selden's quotes (there are so many of them that resonate). From Psychology of the Stock Market:

To a great extent we train our judgment to lend itself to our selfish interests. . . We cannot work for our own interests as in other lines of business--we can only fit our interests to the facts. . . To make the greatest success it is necessary for the trader to forget entirely his own position in he market, his profits or losses, the relation of present prices to the point where he bought or sold, and to fix his thoughts upon the position of the market. (p.57)

Sunday Musings

2010-03-21T16:56:00.002-04:00

My blog has been a blight of late outside of my Weekly Sector posts. Today we had a glorious Summer day in Spring! I grabbed my camera and took some shots. I have Adobe Photoshop (full version), and I found some helpful videos at Luv2Help. I used this tutorial and was able to produce these two images. I thought them kind of cool and wanted to share them with you.

I learned in 4 minutes, what would have taken hours for me to figure out. The internet provides so many opportunities for us to enrich our learning.

Weekly Sector Report: 03/19/10

2010-03-21T13:16:00.001-04:00

The total stock market index went up .65%. Below are the sectors, sorted based on their weekly change.

I've prepared a full report of all of the DJ US Sectors that you can find here. Of the 164 sectors

73.8% were positive v. 76.2% last week
Average increase was .6% v. 1.10% last week.

I wanted to append to this post a small blurb about why it is even important to look at sectors. I've limited my posting to just delivering the facts. However, today I wanted to give a little more of the "why" to the "what".

Many people only trade one index or another. If the S&P is your weapon of choice, then it is important for you to understand its composition. In fact, that understanding should also extend to any ETF as there are a handful of stocks that make up a large part of the weighting. Standard and Poor's has a very good website. You can find the daily composition of the S&P 500 here. Their website used to allow you to pick any single day in history and get the composition. Unfortunately they ceased providing that.

Nevertheless, I had some old data that I captured. I want to share with you a "Then v. Now" look. Below is a table of the S&P as of October 2008 by the market capitalization of its sectors. I've included a comparison as of EOD 03/19/10.

You can see clearly that the change in composition among sectors is material. Money flows in/out of stocks, stocks exist in sector, and the broader indexes are a composite of that underlying movement. The dynamic does not exist in the reverse. Accordingly, dull index action may belie exciting dynamics of underlying sector rotation.

While the above breakdown is for the S&P 500 to be illustrative of the material movements underneath the index, the sector information that I provide is for ALL US Stocks using the Dow Jones classification methodology/system (there are different classification systems). Different indices will select these based on market capitalization.

If these sector looks have created an interest on your part, I want to provide you with some resources:

WSJ Industry Group Tracker: This source lists the daily performance in addition to other periodicities (e. g. weekly, 1 month, etc). I'm unsure if this is available to non-subscribers.
FINVIZ: This site (FREE!!!) provides one of the best way to quickly see charts and other information on stocks in sectors. Unfortunately they do not have broad sector roll ups. You can use their tickers to easily upload sector charts into your software of choice for chart reviews. The information can also be downloaded into a spreadsheet.
Yahoo Finance: Yahoo has broad sector roll ups, but some of the market capitalizations are incorrect (e.g. the foreign money center banks).

Your eyes might be crossed at this point, and you may well be wondering why any of this is important. It may not be important to you. But I believe that the sectors offer a dimension of information that informs whatever work you do on the S&P. And where opportunities are flat on the index because of underlying sector rotation, opportunities abound (long and short) on the sectors.

The presentation of my work here is to give you a divining rod for finding the flow of money beneath the surface. I tend to analyze from the top (broad sector) down (sub-sector, then individual charts). That is my style. It may not be yours. There are many ways to skin this cat, and however you do it you need a sharp knife and skill in which to wield it.

Weekly Sector Sort

2010-03-14T14:07:00.001-04:00

Th total stock market index went up 1.11%. Below are the sectors, sorted based on their weekly change.

I've prepared a full report of all of the DJ US Sectors that you can find here. Of the 164 sectors

76.2% were positive v. 99.4% last week
Average increase was 1.10% v. 4.04% last week.

The full report also includes weekly and daily charts of the broad sectors above.

All date is courtesy of Stockcharts.com | Compilation is courtesy of me.

Wondering Out Loud: High Short Interests and Market Psychology

2010-03-06T09:03:00.004-05:00

The stock market has been lurching forward with surprising force. For armchair economists, one looks about and can only head scratch about the anomalous behavior of the market v. 'reality.' While the market is a discounting mechanism, I will go to my grave believing that it is as perfect at discounting as a teenage boy is at restraint. Marc Faber's cogent observation that economic reality and the market's perception of economic reality are two different things was an important "AHA" experience for me.

Another important quote that I found in going through my blog archives was one given to me by a fellow blogger from Bill Cara's site. It was attributed to George Soros, though I've never verified that:

“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."

G. C. Selden writes in his book, Psychology of the Stock Market the following:

The main point of their argument is that the state of mind of a man short of the market is radically different from the state of mind of one who is long. Their whole study, in such a conversation, is the mental attitude of those interested in the market. If a majority of the volatile class of in-and-out traders are long, many of them will hasten to sell on any sign of weakness and a decline will result. If the majority are short, they will buy on any development of strength and an advance may be expected."

And that leads me to this:

Is it possible that 100% of the IWM is really short? Forty percent of the SPY? If these numbers are true, is it any wonder then that we have these surges of buying on moderate strength? To my amateur eye, these high levels of short interest preclude a major correction until they are reduced. However, I do find these numbers a bit troublesome, as I'm having a difficult time corroborating any by the SPY (FINVIZ reports 44%). I cannot find numbers for the others. The numbers (should one be able to find credible numbers) bear watching.

Weekly Sector Update: 03/05/10

2010-03-05T22:42:00.004-05:00

It was a week of strong, forward movement in all of the 164 DJ US Sectors except for one--Water--which was down 2.1%. Here are the broad sectors, all of which were solidly positive.

On the weekly charts, I'm seeing several sectors that are making new highs, but the ultimate oscillator is not confirming. It's a divergence worth keeping an eye on. You can find the full report here.

Data courtesy of Stockcharts; compilation courtesy of me.

Quantum Mechanics and Trading

2010-03-04T20:49:00.003-05:00

I've many books in my bookshelf that beg reading, none more compelling than Brian Greene's, The Fabric of the Cosmos: Space. Time. And the Texture of Reality. Greene is a theoretical theorist--a mind that dwells in the stratosphere of conceptual thought.

Greene is that wonderful composite of rocket scientist and gifted writer, making his work accessible to mere mortals. Rather than reading equations, such as this. . . .

(Photo courtesy Wikipedia)

. . . I'm blessedly spared both the headache of trying to hum along with some

lip mumbling--even spurts of drooling --and the shame of having to admit that
I've not understood a thing. Rather, I simply need to read one of his
beautifully crafted books.

There was a terrific blog post by Gmak, a fellow Slope of Hope blogger, regarding technical analysis. It engendered a very good discussion. I was particularly happy to see it as I had become cross eyed looking at a number of charts whose ultimate destination seemed unfathomable (like our drawing above). "Now what does any of this have to do with trading?" you might ask impatiently (is that your toe I hear tapping? ).

I ran across two passages in this book that I wanted to share.

The second I wanted to commit to a post, because I thought that is was
something worth reading. I quote from page 11.

But according to the quantum laws, even if you make the most perfect
measurements possible of how things are today, the best you can ever hope to do
is predict the probability that things will be one way or another at some chosen time in the future, or that things were one way or another at some chosen time in the past. The universe, according to quantum mechanics, is not etched into the present; the universe, according to quantum mechanics, participates in a game of chance.
. . . most physicists agree that probability is deeply woven in to the fabricof quantum reality. Whereas human intuition, and its embodiment in classical physics, envision a reality in which things are always definitely one way or another, quantum mechanics describes a reality in which things sometimes hover in a haze of being partly one way and partly another. Things become definite only when a suitable observation forces them to relinquish quantum possibilities and settle on a specific outcome. The outcome that's realized, though, cannot be predicted--we can predict only the odds that things will turn out one way or the other. (p.11)

Running across this passage so quick on the heels of our having a
conversation about TA and its 'predictive' abilities, made it resonate deeply. I
could not help but note that trading/TA is not so far from quantum mechanics.

When your capital is on the line, probabilities must be considered carefully--and none more judiciously than the probability of your being wrong in a trade. As our trading is fraught with our successfully managing (surviving) uncertainty, I thought the passage timely and insightful.

Our technical analysis, for all of its purported faults, is a construct that gives us understanding and cultivates insight. More importantly, our TA and our trading plan anchors those insights. It is not predictive, but it does reveal to us the promise of certain outcomes. To those promises we must overlay our trading discipline. We are not really trying to managed the outcome of a chart, rather we are managing the outcome of the relationship of our trading capital with the chart. Accordingly, our trading discipline is the construct of that universe of uncertainty. Most importantly, we are the final arbiter of those rules those rules dictate the outcomes. That is great power, is it not?

We really are masters of our own universe.

Weekly Sector Update: 02/26/10

2010-02-27T16:49:00.004-05:00

Below are the Broad Sector Indices for the week ending 02/26/10.

You can find the full report here.

All data provided by Stockcharts.com; compilation courtesy of me.