DJIMstocks.com- DJ Interactive Markets

At DJIMstocks.com,  besides maintaining a ‘bullish’  posture in our Daily Market commentary since late March for the broad market (SPX) detailing reasons for such as we progressed higher."  This is almost a clincher and what will drive this market closer to SPX 1000.…03/24/09”,   We also initiated a trade in commodity linked stocks-groups at the same time,  followed by the probability of the small caps trade off earnings.   Below are a few examples of alerted plays in what was to many a boring ‘chop’ trade in May.

DDRX, alerted April 30 trading in the low $9's. traded to a high of $18.75 in 25 trading days.

BWY, alerted at the open May 5th at ~$11 as an EPS play, traded to a high of $16.75 in less than 25 trading days

CVLT, alerted as a DDUP secondary play May 27th, ~$11-12, traded to just under $16 in 8 trading days.

EJ, alerted at open ~$13.50, traded up to ~$17 in 13 trading days.

SPX at close (April 24th)

Those coming back to the market and now finding the SPX up nearly 20% (from 11/20) didn’t help the market sober up from it’s holiday cheer.   Despite new potential tax cuts of 300bln + , we still opened weak and finished in the red.  (We had a test of 918-919SPX early and rebounded).   The market was generally flat tape with exuberance for bargain shopping evident throughout our previously shadow-listed commodity stocks.   Again, we saw beaten down prices of Shippers, coal, solars get eaten up, while the E & P Shales continued their merry way with Oil climbing closer to $50 ( some of this also b/c of XOM for CHK rumor).  All this with a strong $USD should have brought commodity equities down as it did with the price of gold.   Instead, we just got more and more buying of equities on sale from 2008 inventory as those coming late are seemingly chasing ahead of any news from Washington.

At his point,  it seems best not to fight the positive tape, even geopolitical tensions are being ignored as markets worldwide keep rising.   But,  we think it is just a matter of time before analysts get back to their desks and start cutting many sectors/ equities on valuation such as the Solars, Shippers to bring them back to reality.   AMC, MOS (Chem-AG’) reported and should trade down the sector, but AH’s is no indication of that happening.   We’d say wait for firms to have a say and than see the reaction.   Based on below-consensus 2QF09 and EPS and the negative near-term EPS implications of planned production cuts, profit taking should occur.   Persistent weak customer demand is seen and the company is reducing its potash production by up to one million tonnes in the second half of F2009 and reieterated its willingness to further reduce phosphate production up to one million tonnes through F2009.  

We think a sobriety test from the holiday mode is just around the corner and we’re looking for short candidates in the sectors above.

Volume still not back to normal levels.

Wow, we can't believe we are starting our 4th year as DJIMSTOCKS.com with many of you following the markets with us for 6+ years now.   We thank you for your patronage.   It's no secret that many internet stock bloggers come and go as time progresses.    It is either due to the constant changing environments or just a lack of persistency, commitment or consistency in results.    As tough as last year ended,  we can’t forget the first half of the year and commodity rush we had here which included a call on Coals by DJIM #4  week of 2008 and the discovery of stocks like (PCX ANR JRCC MEE CLF ) before they went on to 100% +gains while credit crisis was taking Bear Stearns down just a month later.     We also introduced the Haynesville Shale play  in May before most ever heard of it,  stocks like GDP GMXR HK XCO CRK  all went 100%++  soon after.    Fortunately here at DJIM as we enter our 4th year,  we are every bit passionate about trading now as we were day one and will continue to look for opportunities for all of us to make nice profits in 2009 .    Sure, many traders, including us,  may get discouraged by the poor trading environment from time to time and lack of spectacular trading results.    However,  isn't this what trading is all about?    You win some and you lose some.   There's good times and also bad times.    Going through this trading period like the last few months made our good winning periods that much special and is proof it is best to be ahead of the herd and realize you don‘t need opportunities day in and day out.  We all could have or should have probably just packed it in after the Coals and Shale play periods and called it a year.    There are people who trade to get rich and then there are those who trade to make a living.    For us,  we fall in the latter camp.    Seriously, once you get passed a point where you can live a comfortable life from all the profits accumulated from trading, why still risk it?    Well, we often ask ourselves the same question,  but the answer is always the same.     Nothing else provides us the similar kind of mental and emotional excitement on a daily basis, other than trading!     So, we'll be here for a long long time.

Okay, onto the current trading scene!    Have we started this trading year with a bang or did everyone else think last Friday's action belonged in 2006 instead?     Basically, we had a three day rally that carried us into some unchartered territory.     This is particularly scary.     Okay, for all we know, we may start this new week with some very bullish enthusiasm due to last weeks break of 918 SPX and it could take us to 1k SPX and 10k Dow at least.    Sure,  hypothetically it can happen,  but the odds are still very slim that it will.     This leads us to believe that the recent rally on very very light attendance-volume can only beg sellers to come out and lock in some juicy profit or re-position short.    Why not?   If we were fund managers away on holiday and come back Monday morning,  we'd find a lot of our beaten down positions 20%+ higher than a week ago.     It doesn't take a dummy to know what to do at that point.     Simply put,  what happened during last week's trading should be discarded by the majority as the price action and volume are just not correlated in any way.      We feel many stocks have run up "uncontested"!     It means that many stocks are trading at a level where many sellers would be comfortable selling.   If what we suspect comes to fruition, there will be lack of sufficient bids to keep the market at this level.    Sooner than later, we will pullback.     We are favouring either shorting or staying on the sideline at this point.  One thing we will probably do more of in 2009 is shorting,  we believe we will see SPX go back down to low 800 at some point during the year.

News flow was non existent last week, but it will get busier in the coming week … 2) auto sales for December on Monday, BOE will be making a rate decision,  first central bank meeting of '09 on Thursday, US jobs report for the month of December, retail sales for the month of Dec on Thursday, Madoff scandal review. 

The market is also anticipating lots of Washington in the New Year, including the stimulus package which probably got sidetracked  (in time for inauguration) already this weekend with the withdrawal of the Commerce nomination.   This is the kind of news stuff we don`t want to be wake up to come Monday if overly long. 

Earning season is also about to start and there's no telling how the companies will guide and how investors will react this Q.  It may be different than last Q when everything bad was getting priced in,  it seemed.    We have lots of tension in the Middle East and that's probably causing the oil/gas to get some heavy attention lately, but since when does a war of any magnitude somehow trickle negativity into the market in some form.     Again, we have a lot of facts at our hand and it's up to the market to decide what to do when they get back from holiday tomorrow.     Once the direction is established,  we'd act quick to take advantage of the momentum.     For now, we’d be nervous on any current long trade.

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Mid - December, we noted..

“Right now, last weeks high of 918+ got walled today and so is the battle line……Still, we may need a 'new catalyst'  to move forward it seems, 918 has to fall soon or Bears will use this failure as a reason to call an end to this rally.”

What happened after was the market grinded slowly back down to a low 857 SPX a couple of times,  the latest hit on 857 just this Monday.   That pretty well puts the rally this week into perspective as we hit 910.    That’s over 50 pts in a matter of hours and with 918 within striking distance,  we felt it was time to go back into cash and just keep an eye on things.    The strategy here since last week went to script with the E&P’s (and Financials/ brokers , GS making multi week highs led leading the way.    Simply, we all can afford now to jump off Santa’s sleigh after jacking it for a joyride and sit back and watch if we break 918.   We still need a “new catalyst” ,  in our view, a low attendance holiday trade is not it.    Also, as we’ve pointed in the past the corporate ‘ bad’ news always seems to have a gag order in place over the holidays.   We don’t want to wake up come Friday or Monday and get surprised with a negative PR at this point. 

Yeah....trust and confidence is just not there for the market participants and we'd like to begin the year off trading on the right foot.

Even though volumes are below 50% of pre-holiday trading,  the market has shown it ‘can celebrate’ with or without the Bear or Bull fully in attendance.  Yep, one triple digit up day is reason enough to party and put an end to a crazy year!.     Hopefully,  DJIM’s traders have celebrated some this past week by focusing on the E&P shales such as HK, GDP, CRK and just letting Journals / Alerts guide to a high note finish to 2008.   Today, we got what we were looking for the day before to set this market up for a move…GMAC good news.    Previous day all the noise was around the DOW-Kuwait -ROH deals and nothing on GMAC.   We saw it differently as we felt the market wanted an answer it didn’t get yet surrounding GMAC.    Most have become immune to the word bailout and many underestimated this potential news and its potential impact.  Without going into deals,  this announcement was much better than just a bailout.    The follow through hit just were we wanted on the Financials/ brokers,  particularly GS and JPM, respectively up over 7 and 4%,  rallying the market into close and the SPX to 891 just above the 50ma resistance.   (funny thing is when we said 888 is small resistance, we were looking at a chart without the 50ma on it).    Almost in tandem,  the $OSX (for our Shales) and GS bubbled right after our 2:15 pm note highlighting them to finish strong..“OSX and GS/ JPM to follow for last 2hr, should tell the tale if we hold triple digits".

Despite energy and Oil stumbling for most of the day, Crude trading off by a $1 to $39/bbl, off lows of $38/bbl and Natgas prices lower to $5.86MM/btu,  we still got a better rebound in individual stocks into the close.   Partly, we think this positive action also has to do with new SEC rules on reserves where the value of the reserves will be based on average oil and gas prices over the previous 12 months, rather than at year’s end price giving major Oil co's the ability to re-evaluate and increase reserves.

Of course, tomorrow is the last trading day of the year, we may get more action than anticipated because many will be winding up their year end activity. 

Most importantly,  we'd like to take a moment to say thank you to our members/ friends for sticking through this tumultuous year with us and to wish you all a Very Happy New Year and a prosperous 2009!.

Sincerely,

Demi & Jon

The theme for Tuesday’s trade remains as it did going into last Tuesday’s trade with a few possible curves thrown in.

The E&P -Shales and a watch of support for the SPX at 855.  There is not much else out there we need to watch or trade with or against with these low volume days.   Just pick our spots.   Stocks bounced a few times off SPX support around 855 and finished at 869.  The bias seems to be positive with 2 trading days left in the year.  The possibility exists for a nice broad day this week,  if we get a nice curve to hit by the Financials.  If we get ‘a positive’  GMAC headline ( Alert note today) we could get this action.  The SP financials came off worst levels of the day,  despite the DOW-Kuwait failed acquisition weighing on some banks committing bridge loans for the DOW ROH follow through deal.  GS and JPM continue to show strength implying a market coming to health.

Because we want to keep our hands somewhat clean heading into the 2009 trading season,  we haven’t strayed into pursuing more of the crude action affiliated names which is just fine with us.  So far the E&P’s are providing enough,  outperforming even on a day where Oil ruled the headlines.   Today,  NATGAS advanced to 6.06,  last week it was 5.40 per contract.   Todays Natgas 12% gain cannot be fully attributed the rise of oil,  we actually saw oil forfeit all of it’s overnight gains at one point before finishing just off $40.   We’ll continue to favour the energy patch over the Oil names as long as the tension doesn’t escalate w/ other Oil bearing countries involvement.

We’ve stressed the holiday mode attendance, but keep in mind the market can celebrate  on just enough liquidity,   just like your family and friends during the holidays.  Otherwise,  just watch the support levels to the downside talked about here.

Once again, we are at this special time of the year.   Yup, this is the last weekend journal of the most turbulent trading year probably ever encountered by almost all involved in trading the markets.   First, we hope everyone had a great holiday so far.    It is more crucial now than ever to take your minds off the market and enjoy your time with family and friends.   This is partly because a positive bias has been emerging to begin 2009 off with and so you'll most likely get back to trading at a faster pace soon.

The upcoming week is probably going to be light as well, we'll assume there will not be much going on, but Fridays, 'Geo-political tensions'  in the Middle east should spark interest in Oil and commodities.  Once a country like Iran opens their mouth on the tension, oil will be a hot topic.   We're positioned well as we've highlighted our interest in the E&P's for other reasons last week.   Some of the natural gas companies such as HK, GDP and CHK CRK were been punished early last week during the oil sell off.   With the potential firming of crude oil due to the ongoing situation in middle east, we feel some of our favourite oil/gas plays will be bid up as a result.   The only thing we wouldn't expect is a lot of volume.   Remember,  the coming week is still considered a holiday week because of New Year.   Most are still on holidays or just gearing up for the New Year's festivities.  

One thing we do know at this point is that things are bad out there and economy will probably get worse before turning better.    They say the first few trading days of January will indicate the kind of market we'd be in for the whole year.    Although we aren't superstitious in that way, we do feel it can give you a pretty good indication on where the investors want to trade this market for the next few weeks.

We'll be on every trading day this week,  but we'll take things nice and slow and finish this year off on good spirits.

..or will the time to year end be all about returns, as in selling?.    This question will likely not be getting any answers on Friday as attendance will still be light and news flow weak.

...30...20....8...

Those numbers are the consecutive spreads of low to high on the SPX for the week.   The market is simply trading, (if that’s what you call it?)..in a holiday mode.   Well,  we’ve made it to class to this week and the only potential trade in the makings, unfortunately has been hampered by the attendance.

Early in the week,  we pointed out the E&P sector,  known here as the Shales  in particular may have been a potential buy -in after the sell- off Monday on already light volume.    Any other time of the year this might have already worked out as a profitable trade by now as ‘ Heating gas’ (UNG)  has been the only thing of interest even as Oil continues it’s slide the past 2 trading days.      On Tuesday, Natgas strangely saw its best day in a long time, surging 8.5% to $5.74MM/.   We were scratching our head as to why the E&P's were not reacting much to this at all for some reason.   The low volumes/attendance was our only guess.     On Wednesday, Natgas had pretty bullish inventory numbers compared to all the other inventory numbers (as stockpiles dropped more than expected).     If demand is destroyed,  why are these numbers getting bigger.     Leading into Friday’s trade this is the only group we are coming for,  hopefully this move in stocks is just lagging because the performance of Natgas caught traders by surprise.   You can see by the UNG chart,   it had a late day surge to weeks high (AH) after the 12pm data came out and E & P’s were still lagging.    Maybe 1 hr before XMAS just ain’t enough.    Besides low attendance, the reaction is in part to Oil continued decline and so this Shale move is in limbo.     If we start getting a higher Oil by Friday,  the Nat gas chart may help awaken a few that come to class.