Stocks Likely To "Spring"

stocks to buy for summer As I anticipated, markets received a bit of a "whip" rebound after starting off the week with some strong selling. The Dow closed up 285 points, after two days straight of selling. China's uncertainty with European markets were a big factor in pushing down indexes during yesterday's trading. However, today, their move to step in and help European countries with their debt crisis helped spur a nice rebound. The question is, can this rebound continue into Friday, which lately has been a difficult task. I don't expect tomorrow to be any easier, as investors would have to hold through the extended, holiday weekend.

As we push farther into spring, we are starting to see some seasonal moves. First of all, oil prices jumped and will most likely continue to go up as the US Weather committee announced that this next hurricane season could be one of the worst we've had in 5 years. When considering what happened with hurricane Katrina, people tend to get anxious with these statements. As a result, oil and other commodities got a boost as they usually do during disaster warnings.

With seasonal adjustments come some possible opportunities. History shows that certain companies have consistently outperformed during spring months, which has resulted in strong gains for investors. It is hard to place a unique reason why some of these businesses do well during the months, but consistently, their stocks seem to improve. Here are a few, with their spring averages:

Office Depot
Average Spring returns: 40.44%
Best Spring season: 2009
Returns in best Spring: 406.5%

Priceline.com

Average Spring returns: 37.12%
Best Spring season: 2003
Returns in best Spring: 194.96%

Pioneer Natural Resources

Average Spring returns: 32.33%
Best Spring season: 2009
Returns in best Spring: 121.24%

Allegheny Technologies

Average Spring returns: 31.13%
Best Spring season: 2003
Returns in best Spring: 137.55%


The above are just a few of the companies who have historically seen a great improvement during Spring and early Summer months. For me, I usually always have a "seasonal" section of my portfolio that I am always changing, as for the most part, most perform well. Let me know if you know of other good spring buys, feel free to comment below. Happy Trading.

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Dow Closes Under 10,000

currency crashIn the morning of today's trading, it was looking like markets were going to rebound a bit, after the selling start to the week. However, markets violently sold into close closing the Dow down 69 points, putting the index under 10,000 for the first time since February. Many analysts were expecting a good climb back at this point and today's selling close shows that investors are still very skeptical about economic pressures.


Stocks were hit a bit by the climbing dollar. The dollar outperformed the Euro today as problems continue to hit European markets. China announced that they will be reviewing their Euro-zone debt holdings due to the recent turmoil. This did not help the already struggling European economy.


Market movers will want to get this market above 10,000 asap, so I expect some strong upward pressure in the next couple of days. However, volume spiked today with the selling, putting trading levels far above the recent average. The volume that accompanies the selling is what makes me anxious and a bit nervous for upcoming performance.


ICSC came to a conclusion yesterday and I found much of the same results as I had the 2 days prior. Institutions are definitely on the hunt, looking for new opportunities, however, nothing really seems to make sense at this point. There are transactions being made, but they are few and far between. Longing the dollar and treasuries seem like a pretty good play at this point, as uncertainty is bound to increase. Watch out for the whip rebound. Happy Trading.

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US Retail Update

icsc recon summary I have spent the last two days busily engaging myself in the annual RECON ICSC conference at the Las Vegas Convention Center and I thought I would share with you some insider information I have gathered so far. As for today's trading, we finally do see an end to the green Monday trading streak, which I believe was 15 weeks straight, as the Dow closed down 126 points. This is a significant move as, lately, the market has been heavily relying on the 100+ rally we have seen most recent Mondays. We saw it struggle last Monday, and today it continued to close. It will be interesting to see how this effects the rest of the week's trading.

Government regulation is causing a lot of noise in capital markets. Of course, everyone is familiar with the financial reform bill that is getting slaughtered in the headlines, however, this is not the only one making investors cringe. During the convention today, there was much talk about the the new real estate bill that is floating around, which would essentially raise taxes up to 150% for some real estate owners. Obviously, such a move would cause for serious consequences for owners, which there were many commissions from convention leaders to fight against the pending bill. The government has done a decent job of distracting consumers, while they initiate their massive new tax bills. We new it was in the agenda when Obama took office, however, I thought he would wait a bit before bringing on the taxes. Obviously not.

From a retail perspective, national tenants are actually expanding at the moment. Not so much in secondary and tertiary markets, but are fairly active looking for new locations in dense, primary markets. Local mom and pop stores are continuing to struggle as consumer spending is still very restricted in limited at the moment. Sales are still getting generated by big sales promotions and large discounts as margins still remain relatively small.

It seems, for the most part, lending is a bit easier to find than it was a year ago. However, leverage is much less than it was, and borrowers need to jump twice as many hurdles to qualify for loans. However, I hold from multiple institutions that they were actively acquiring loans on a variety of product types, which is a much better sign for markets. We will see how this remains as the government continues to step back from mortgage loan purchases and inflation begins to show up.

National vacancy continues to be a problem for the economy. Real estate owners are experiencing record vacancy numbers, especially in secondary markets. Not only that, but many rents have been slashed by more than 50% in just a year. I was amazed to hear about just how low some landlords were willing to go in rent to keep a tenant in their building.

As a whole, the overall attitude of the convention has been a lot more optimistic than it was last year. Sure, last year we were in the midst of one of the largest downfalls in US history, but it was more positive. Many do feel that we are a very long way from sustainable values and that a lot needs to still be worked out between banks and owners. There were a few who did still feel that the market will be getting worse and are still prepared for more downside on their properties. At any rate, they don't expect this year to get much better and if the government continues to budge themselves in, many of them said they'll be moving to Australia. Happy Trading.

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Bad Week Ends on a Good Note

solar stocksWell, after yesterday's 300+ point loss on the Dow, markets rebounded and were able to close out the week on a positive note with the Dow closing up 125 points. In fact, I believe next week, we will see quite a bit more green. I was surprised to see yesterday's big sell off, not that I don't feel that we are overbought in the markets (I very well do!), I just feel that to closely track that "topping" curve we are seeing in the S&P, a bit of a rally back is needed to gain much larger momentum on the downturn. Two weeks ago, we saw a bit of what this trading environment is capable of. Who said we are not vulnerable to market crashes in this day and age?

One industry I have been tracking lately is solar. The past month, solar had been demolished due to its strong tie to European markets. In fact, Germany acts as one of the largest solar nations out there. Due to recent debt turmoil in Europe, solar has taken a beating. STP, a solar company I track closely has pretty much been cut in half in the last couple of months. I still believe there is a lot of upside in green energy stocks. Not so much because they are a financial viable business model, but more so that our current president has an agenda that he has proven he will stick to, and green energy is one on the top of the list. Already, bills have been proposed to exempt capital gains from green energy company investments as well as tax credits. If these perks get passed, watch for a big move into some of these companies.

As I have said before, Monday has been very reliable in turning into a green day. In fact, last Monday I was sure we were going to see our first selling Monday, as the market was down 180 points at one point. However, the market (or whatever powers it was) pushed back and was able to get all the major indexes back into the green before close. It was really phenomenal to watch. If yet again we see another green Monday, I will be impressed, as there is a lot of uncertainty going into the weekend with the financial reform bill. So time will tell.

Commodities should still perform well, as well as gold. After a bit of a rally back, I expect a pretty large jolt to hit markets, which usually tends to bring commodities to a premium. Also, Treasuries should get another bump as well. So for me, I expect a green week next week and hope to make some good profits to take advantage of it. I will also be attending the largest retail real estate conference in Las Vegas this weekend, which is always an eye opener. I will keep you posted on what the sentiment is like there, which is a wealth of knowledge. Happy Trading.

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If Times Are Getting Better, Why So Many Defaults?

mortgage defaultsWednesday experienced yet another day of down trading as the Dow was down over 100 points at one point during mid-day, only to close down 66 points. With the downward trading has also come a rather significant bump in volume, which still supports the fact there are more sellers than buyers in the market right now. I was very surprised to not see a rebound today, considering 2-day consecutive down days are a rare thing nowadays. This makes tomorrow's potential to be a green day only that much stronger. I believe there needs a bit more of a rally back to really gain momentum on the down side to complete the leveling trend with the S&P.

May has definitely brought a sentiment change compared to what we saw in April. Just what I am finding in my daily business, there has been a global sentiment change that has taken place. In March and April, about 8 out of 10 of my clients would say they felt that the economy was on the way up and that better days were just around the corner. Now, only about 4 out of 10 really feel that the tough times are behind us. Whether it is the European debt crisis, continuing employment struggles, increased taxes, or sluggish home prices, it is definitely taking its toll on the economy. It seems that in most of my daily, casual conversations, people are bringing up their concerns for our state in the economy. In March, it felt like we were all enjoying a night out on the town after just completing boot camp.

The mortgage crisis will continue to takes it toll on the economy. Very damaging data hit headlines today regarding consumer mortgages that can't help the already dragging economy. More than 10% of home owners have missed a mortgage payment during the months of January - March. This is up from the record height of 2009's 4th quarter 9.5%. 10% may not seem like that big of a deal to the average person, but when you consider just how many people that equates to and then total the amount of outstanding debt, it is massive. On top of this, it is estimated that about 7% of Americans are in risk of losing their homes. Never, since the Great Depression, has the US seen such a large risk of home loss for consumers. If we really consider just how harsh the consequences are of a mass foreclosure process, the results are very depressing. That is 24.5 million people who are in risk of losing their home... Sure, that probably won't affect anything (I hope you sense my sarcasm).

What is even worse is that government intervention has had little effect. The $75 billion bill that Obama issued to assist in home loan modification has all but put a door ding on the problem. In fact, only about 25% of the 1.2 million consumers who applied for the modification program have continued to receive an extended modification program.

Sure, the government will continue to spend, especially with Obama in the White House, however, in my opinion it will take several years for this country to just begin to sort out this mess. Put future inflation aside, the mortgage crisis could be the dagger to bring the market down yet again. What really is becoming dangerous is that now many consumers do not care if they pay their mortgage and actually go and spend money on other things before paying it. So yes, we may see a bit of a rally back tomorrow, but I do not see how things are getting better in the long run. Happy Trading.

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PPT Gone Public?

sec regulationIt seems as though investors took Meredith Whitney's words to heart as the Dow finished down 114 points to end the day. Financials especially struggled which yielded some strong returns for FAZ for the day (up 10%). No doubt, there is a much more resisting trend that is lurking in markets currently. When analyzing charts of recent months, you will see movement up with much more fluidity. However, now we are seeing a continual wall being hit, despite some more favorable news which has been announced recently.

Institutions are having a hay day with the market right now. Some of my hedge fund insiders have told of some their recent activity. Manipulation is running ramped in the markets currently, and not only from the government. Many institutions are taking advantage of this low volume trading and seeing strong gains on these volatile pushes. Also, they aren't choosing sides. I have heard from multiple sources that money is being made from these funds on both the long and short side. No wonder we are in this crazy market!

Today, the SEC proposed an initiative that, in a sense, will publicly allow the PPT to take action in markets. Under the initiative, it states that any stock found within the S&P 500 that experiences a 10% drop in stock price in one day, would be temporarily halted for 5 minutes or more. These so called "circuit breakers" would be applied during Eastern trading hours of 9:45 to 3:35 PM. In describing these circuit breakers, SEC Chairman, Mary Schapiro said:

"We continue to believe that the market disruption of May 6 was exacerbated by disparate trading rules and conventions across the exchanges. As such, I believe it is important that all the exchanges quickly reached consensus on a set of uniform circuit breakers that would be triggered when needed."
So, in other words, lets completely take away the idea of "free market trading." For years, there has been an extremely large amount of evidence supporting the notion of government sponsored organizations (PPT) who are commissioned with the task of preventing market free falls. There are some out there who felt the idea was rubbish and absurd. Well, there you have it, The SEC wants to make it public. They learned from our "mini crash", that they were very much out of their league to try and halt the crash, while also remaining discrete at the same time. This will allow them to publicly interfere with free market trading and create who knows what kind of trading trends. In my opinion, regulation is getting out of control and The SEC are overlooking some serious consequences that could arise from their plan.

If thinking that a temporary ban on certain free falling stocks will take away the negative sentiment of the sentiment, they are mistaken. These stocks that would be closed for trading would only bring more negative sentiment to investors. It is much like when companies were being bailed out by the government. Banks stock prices were crushed when aide was announced, because it revealed their financial weakness. So to will be the case for these "circuit breakers" in my opinion.

At any rate, I'm looking for a bit of a rebound either tomorrow or Thursday, before an even stronger push down. As I stated in a previous post, we are seeing an almost identical leveling off chart for the S&P. If that is the case, down we go. Happy Trading.

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Stock Buying Resources

Here are a list of a variety of resources and answers to many questions regarding Stock Trading and the Stock Market.

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Meredith Whitney vs Banks - Round 2

meredith whitney bank failureA couple months back, I shared with all of you a video of Meredith Whitney in which she discussed her feelings that big banks were going to be seeing some hard times in the near future. This announcement was several months after she first announced that banks were very undervalued when they were near there lows back in March of 2009. As I have said before, I believe Whitney does a great job of taking an unbias approach at looking at valuation and expresses an honest, logical opinion. Well, today she went another round with the banks...and she came out swinging.

In an interview with CNBC, her main theme was "Avoid banks at all cost." Wow, that is a bold statement, especially from someone who said banks were a steal just over a year ago. Well, a lot has changed since then, and she has good reason to make such a statement. Here are a few reasons for her major concern.

First of all, she feels that the new Senate Financial Reform Bill will have serious adverse effects on the banking industry and greatly restrict credit, resulting in a gash in bank earnings. Referring to the senate she said:

"Politicians have proven far worse than our worst expectations,. It could be very bad for banks."
She referred to two major problems that stand out in the bill. The first is the rule for credit card companies to comply with individual state caps on credit card interest rates. The second, is regulation on how much credit card issuers could charge merchants for using their cards. By enforcing these two new rules, Whitney said the following:
"It's going to make accessing capital so difficult for pockets of the country," she said, particularly for small businesses that often depend on credit cards for funding.

In addition, the proposed rule on merchant charges—instead of benefiting consumers—will price community banks out of the market, Whitney said, restricting credit even more.

"Some of these regulatory proposals are going to make it so difficult for everyone involved that you'll see, I think, at least another $1.3 trillion (of credit) sucked out of the system."
She went on to explain more fully today's drop in credit card delinquencies. She said that the drop was a result of a new rule enforced earlier this year which prompted banks to not consider consumers of low credit scores as customers. She also said that she expects a "double dip" in the housing industry as well as more job losses in the employment sector. Overall, in regards to the economic recovery she said, "It's going to be rocky sledding." Conclusion...there may be some high sailing for FAZ, SKF, and SDS. Happy Trading.

Oh and PS...Pretty much disregard the earlier post regarding the break in Green Monday. PPT was able to bring it back before close...They never cease to amaze me!

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Green Monday Streak Broken

I was very surprised to wake up this morning and see that my stop losses had hit for my couple longs I bought on Friday before close. For 12 weeks straight, I believe, we have seen a green Monday to open up the week. Many people felt that seeing green to start the week was a sign of a return of investor's confidence, as confidence would supposedly build over the weekend. Well, whatever was the reason, the streak was quite impressive and draws a lot of questions from me, considering the trend was broken today. Sure, nothing too significant can be drawn, however, it is another sign for me of weakening markets and a shrinking in consumer confidence. PS... I think EUO (see above chart) is definitely one to consider in the short term. The Euro is struggling.

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Is The S&P Peaking?

S&P levelingAs anticipated, markets remained rather flat for most of the day, that is until a big swarm of selling hit markets with about an hour left of trading to close the Dow over 100 points in the negative. I was a bit surprised by the aggressive move, especially after such a flat day, but the "nervous" end of day selling continues to show the uneasiness of investors. Accompanied with the selling, was significantly more volume than we have seen on buying days.

There still remains a lot of talk about last Thursday's fluke crash. Many analysts are still trying to prove that indeed the drop was almost all related to technology flaws and that there was no "real" selling motivation. That statement is rubbish and, in fact, Thursday's big drop is matching perfectly with technical signs of "topping off" for the S&P.

As you can see from the graph above, the trend almost exactly mimics a topping curve. From the recent highs to Thursdays low, there was about a 12% drop in the S&P. That downward "whip" is the largest contributors to index leveling. Now when we evaluate other data, we see that they too match a level off formation.

If the market is indeed leveling, what we can expect in the short term is a bit of a rally back to recent highs and maybe even beyond a bit. However, following that, markets tend to respond with more frequent "whips" in the market, sending the S&P down even further. Of course, this is speculation based on charts, but the percentages state that indeed the S&P is leveling off. If this does become the case, Thursday's crash was just a warning to investors that the market is sucking wind.

Consumer confidence continues to struggle. In a large, national media poll conducted, it was reported that over 75% of consumers feel that we are still in a recession? Really? But everyone is saying we are done. The government, CNBC, Tom Hanks, and Cramer are all saying we are out of the recession. So how can this be? This is because, the consumer continues to suffer. Home prices are still declining, health care and energy prices continue to rise, taxes are increasing, and disposable income is still shrinking. In this type of environment, consumers will continue to be on their guard and not be so easily fooled by inflated earnings or a "ra ra" speech from Cramer.

Friday should be interesting. I'm sure market movers did not like that selling close today. Lately, Friday's have been trending on the sell side, however, often we see open with a bit of a buying spike, only to trail down by the end of the day. Once again, I plan on entering some short positions early morning if this is the case. I will be exiting these positions by close, only to pick up some longs just before close. Lately, it has almost become automatic that Mondays open green. Of course, I am a bit worried of weekend news in relation to the debt turmoil in Europe, however, I will maintain strict stop losses and roll the dice a bit. Happy Trading.

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ETF Concerns

Well, we are now returning back to business as usual...higher movements in indexes accompanied by low amounts of volume. I was beginning to think that maybe people were going to be dusting off their keyboards to start making some trades, but it lasted about 4 days. At least for now, it seems that investors have squelched the recent "fluke crash" and are pressing forward to try and get the Dow above 11,000 again. As for me, I was lucky to be able to exit some of my major positions before Monday, which resulted in a great week for me last week.

For now, I am returning back to bunker mode, which is maintaining very small positions of rather low risk positions. One opportunity that is flourishing right now is gold. Lately, it doesn't matter whether the the market is going up or down, gold goes up. Charts are showing very strong strength for gold and we could definitely see a nice pop here in the short term. I do still see deflation risk for gold in the future, but not short term.

Apple should see some strong moves back towards the $180 mark. Tech is maintaining their status as the rock among a lot of shaky industries. This has definitely not been near as bad of a recession for many tech industries. Japan's tech is currently performing very well, which could have a positive influence on the NASDAQ tomorrow.

After last Thursday's crash, there have been an increased concern about the ETFs. During Thursday's spiral, the NASDAQ cancelled sell orders for selected companies in order to try and minimize the damage. There are analysts who feel that during an longer, sustained crash, such imposed government regulations would be more strictly enforced, which in turn would cause problems for the ETFs. Considering that many of these ETFs are based on derivatives and essentially mirror an index, worries that when these bids are shut down, the mirrored index will too be shut down. There continues to be a lack of regulation for many of the ETFs, however they can still be instruments for quick, large gains (and vice versa).

For me, I'm no so convinced. I do believe the ETFs (especially highly leveraged) should be traded with caution, I find it hard to believe that one would be completely unable to exit a position during a market crash. Temporary holds may be put on place, however, I would have to think an exit opportunity would have to be available. Those are my thoughts.

I expect the market to continue to bounce back and forth. Until, I see some more definition in the charts, I am going to remain rather light for the time being. Don't get me wrong, strong movements could show up again as early as this week, however, from today's trading, I'm guessing that won't be the case. Happy Trading.

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Bulls are Back!

IMF bailout crashGreen Monday continues this week as the Dow is currently enjoying a 360 point rally to respond to last weeks disaster. As I said Friday, this is something I was definitely expecting, which is why I chose to exit out of most of my short positions before close. Whatever the reason may be, Mondays have a very significant trend to result in positive trading and considering how we finished last week, I knew there was potential to see a lot of green today...and that is exactly the case. One detail to note though is that the volume of today's trading is much more mild than on the days of selling. Once again, we are seeing evidence of an actual lesser amount of buyers, but just more trading per buyer than seller. This could lead to several conclusions, which mine is, don't short Mondays.

Much of today's success is a result to the trillion dollar bailout the IMF and European Union passed over the weekend. This is exactly what I was referring to in my post this weekend. Time and time again, government regulators are coming to rescue with event after event. Sure, on paper it looks to solve all major problems. Just throw some money at it right? I don't think there is any economist out there can accurately forecast the kind of global side effects the global economy will face in the coming years due to trillions upon trillions of essentially "buried money."

Sure, the rally has brought a bit more confidence back for investors, but still many buyers remain sceptical. Even today's much lower volume compared to the selling days show that many are much willing to sell than to buy at this point. So sustaining this rally should be a difficult task this week and one which will be met with a lot of opposition on daily basis. Already, there are many who are opposing the IMF's decision, saying that after one climbed mountain, there's 10 more behind it. So what happens when Portugal, Spain and Italy's debt becomes threatened. Are they too eligible, or will they be given the Merrill Lynch treatment. At any rate, I did expect today's rally, so today acts as no surprise, however I do feel that it will be very hard to sustain. Thus, I'm seeing some more shorting opportunities this week. I will give an updated post later on after close.

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Selling into the Weekend

market crash tradersWell, it seems that investors are smarter than I thought. Despite a very good employment report (almost 300,000 new jobs created, excluding census workers), markets still sold off going into close on Friday to make it the worst week for the Dow since 2008. After opening up in the red, the Dow actually bounced back and even saw some green, however, sold off to end the day down 139 points. Due to markets opening up in the red and not in the green as I had anticipated, I waited until we rebounded back to almost green until I picked up some short positions (FAZ, VXX, and SDS). I then sold out of these positions before close as to not get caught with our usual green Mondays.

More speculation about whether it was indeed a "fat finger" error that triggered the mass selling yesterday caused for investors to remain unsettled on Friday. Now, many analysts are saying exactly what I said in my post yesterday as an explanation of what caused yesterday's market crash. Due to more modern, computer regulated trading practices, a domino effect can quickly come into effect, especially when markets are uneasy with an international debt crisis. Authorities are still looking into the "exact" reason of what may have caused it, but unless they get real creative, I don't think they're going to pinpoint a singular event.

Back in the old days, during similar types of crisis's, market traders would just not answer the phone to make buy/sell orders. In a sense, this is the same type of response. The selling triggered computer sell positions all over the world, which would most likely explain why many were having problems placing trades on their computer platforms yesterday. I, myself, am not fooled to think that yesterday was a fluke and that we can expect to return to business as usual on Monday. Today's negative trading, despite a very positive employment report, proves otherwise. So, active traders, be on your guard, because I have a feeling the next few weeks are going to be very interesting. If you are needing to open a trading account, I think Zecco.com is offering a monthly free trade promotion. Worth checking out.

VXX continues to move strong, being up another 12% today. Now yes, this ETN will get hammered on a big rebound day, which is why I am trading it with a lot of turnover and very tight stop losses. However, it has moved up close to 60% in just a few days. With the always concern of Monday being a green day, I had to exit out a lot of this position, with some stop losses on what remains.

It will be interesting to see what news comes out over the weekend to either help or hurt our current situation. Remember, just as how devastating to markets this Greece debt crisis is, an unseen solution, if it were to be announced, would most likely bring a lot of confidence back to Wall Street. We have seen in times past that the IMF and US government are willing to do just about whatever it takes. This why it is always dangerous trading around these influencing variable events.

I do, however, remain pretty confident in a re-tracement regardless of the outcome of Greece. We had been way overbought for a while now, even with the trillions of government stimulus that has now reached our economy, we are only seeing minor steps to growth, which is I'm sure, much less than the government was anticipating. We cannot rule out the possibility of a double dip for this recession, as it is very common to see happen in these types of economic environments. Now that the problems are extending globally, the US government and The Fed are starting to lose control and the man behind the curtain is being revealed. Let's see what next week brings. Happy Trading.

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Some Weekend Humor

Due to the weekend being here, I thought I would end the week with some humor and share this video with you that a friend sent that got me laughing. I have another post that I will post later summing up the week, however, enjoy this for now. I'm an Iron Man fan, and am looking forward to the new movie, however, I don't think I compare to these guys, enjoy!


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Was Today's Market Crash a Computer Error?

crash stock errorFor many, today was starting to look like the beginning of Armageddon on Wall Street, as around 2pm Eastern Time, markets completely began to crash. At the height of the drop, the Dow had dropped over 8% (over 990 points!). When I saw the numbers come across my computer screen, I had to blink twice. I then went to check two other sites as well as my phone to see if what I was seeing wasn't a glitch. Indeed, it was really happening, however, markets were somehow able to aggressively rebound back and close down just under 350 points. Sure, the final closing is still the largest we've seen in a year, however, it looks much better than a 1000 point down day, which would have been the largest one day decrease in the history of the Dow.

So what happened? Well, that explanation seems to be under debate as we speak. Many sources are claiming the mass selling was triggered by a computer error. Some sources are saying that a trader entered a "b" for billion instead of "m" for million in a trade possibly involving Proctor & Gamble (see trading chart below), a company within the Dow. There is speculation that Citigroup may be the bank that issued the erroneous trade, however, they are claiming that their data matches up and that the trade came from somewhere else. At any rate, the first thing you need to decide is do you really believe this solely caused today's crash?

Play to Win $250,000 - Fantasy Stock Trading Game

Sure, with the evidence of a large increase in selling volume in PG (which is usually a very moderate moving stock), questions should arise. However, can we really believe that someone has access to completely derail the entire US Stock market with the typing of a letter? Really? If this is true, I believe terrorists just found a new weapon for the US. I have a hard time believing that the entire stock market was selling off due to a solo computer glitch. However, this explanation sure does a good job of explaining one of the wildest days of trading and helps to restore some security back in markets. Here's my theory...

Due to over double the volume being traded on the Dow, I believe there is a bit more to the story than just the P & G episode. I do believe that some selling had been initiated by the large drop in PG's price, however, I believe other sellers took over as well. The problem with today's way of trading is that everything has become automated. Sure, it has made stock trading ever so convenient, however, on days like today, it can be a disaster. Hedge funds and institutions around the world are holding positions in the stock market and many times stop losses are placed on them to minimize losses. Well, due to our current, very fragile market at the moment, many of these stop losses have become rather strict and can trigger with just a few percentage loss. With the plunge in the Dow, I am sure many of these automated selling positions were triggered, which in turn ignited the domino effect that we saw today. Do I believe that the government intervened with some help to put an end to the crash, sure, but that's me.

I cannot say today's event was a natural event, however, the gains and losses that were experienced today were as real as they get. In fact, my portfolio had a huge day for the good. The ETN I discussed yesterday, VXX, was at one point, up over 25%. My shorts on SPY and longs on SDS also killed it. My positions in gold were also rewarded. I was able to take a lot of profits in these today, as I felt from the beginning of today's crash, the market was not naturally behaving. I do not want to risk what could be a very big buying day tomorrow, if people all of a sudden feel the need to buy back into their old positions at a discount.

So this complicates tomorrow's trading a bit, which is why I greatly lowered a lot of my short positions today. Tonight, many will most likely be reading the story of the "computer glitch" trading and feel that today was a fluke. Is there really turmoil in Europe that could be a big problem for the US? Sure there is, but the glitch story will definitely take precedence. After reading the story, many may feel that now the market is undervalued (if you could believe that) and feel the need to buy back in fast to take advantage of the glitch. This could spark a rather large buying day tomorrow. On top of that, we have the unemployment news wild card, which if turns out to be positive, could be another log to throw on the rally fire. At any rate, I did not feel like giving back most, if not all, of today's profits.

My personal belief is that markets will open up very strong out of the gates tomorrow. PPT has seemed to be a bit more active on Friday mornings. This combined with some anxious buying, we could be in store for a very strong morning. If that does indeed happen, I plan to take some short positions, as I do believe we will begin to trail off by the end of the day. Investors are becoming more and more cautious about holding stocks over the weekend. However, I dare not hold my short positions over the weekend (I'll cash out before close) as the last 10 Mondays have been in the green. I will be using pretty strict stop losses, so lets see what happens. Happy Trading.
PS - Trading is looking to become a lot more interesting here in the short term. For those that utilize social networks... Add us to your list - Twitter & Facebook

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Markets Crashing?

markets crashing
Wow, well I had a feeling there would be fireworks by the end of this week, but I did not expect this. The Dow was flirting with the -1000 mark earlier and is currently rebounding, trading around the -500 mark. I'm getting reports of computer trading platforms crashing and buy orders not being fulfilled. Turmoil in Greece is spreading to the US and we're seeing it today. I don't see the government letting this market tank like a rock in one day, so I expect to see miraculous rebounds like we just saw or even a temporary ban on shorting. I've already heard of people not being able to buy into short positions right now. Enjoy the fireworks.

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Stocks on the Decline?

After Tuesday's big triple digit loss, bullish investors were hoping for a rebound on Wednesday. However, markets closed on the downside yet once again, having the Dow close down 60 points. For now, the double day downer is rather significant when you consider that, recently, most big down days were immediately followed by big rebound days. That chain was broken today. Now, be on the lookout for a potential rally either tomorrow or Friday, because I do not see this market completely sinking all at once into a stock market crash at this point and here are some reasons why.

Much of today's negativity rooted from more turmoil in Europe. Protests have broken out regarding Greece's monetary dilemma and concerns for Portugal's credit rating are rising. Although there were some positives for the day (S&P earnings upgrades and ADP employment increases) they were muted by the negatives. I do feel that we indeed now have some downward momentum, however, I feel that a slight rebound is due Thursday or Friday. With the optimistic report from today's ADP number, Friday's unemployment report could be rather favorable. If numbers were to come out as a positive surprise to investors, markets would be primed for a strong rally. So I am on the lookout.

As I discussed in yesterday's post, one thing I am tracking closely at this point is the VIX levels. VIX was up nearly 5% today as investor's uncertainty grows. As the VIX does usually contradict the overall market direction and may have some weakness today or tomorrow, here is a nice exchange traded note (ETN) pushing out some rewards for the rising VIX. VXX, the VIX short-term futures ETN, has enjoyed some nice strong gains the past couple gains. For those that feel market uncertainty has a good chance of increasing here in the short term (me), VXX is a great option to consider. Beware, it can move with some volatility, but that can be rewarding on the right side.

Charts for SPY show some good technical trends for a potential pullback. I added some put options as well as bought into some SDS yesterday. Even with a rebound, I feel that these positions should reward me in the next coming weeks. After evaluating what we do during tomorrow's trading day, I may try and pick up some longs to take advantage of a potential rally on Friday. So, we will see how it goes. Happy Trading.

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VIX on the Rise


Markets opened up on the extreme downside on Tuesday, which was a day earlier than I expected, nevertheless, this is the May that I have been warning about. Clearly, investors have some concerns as the market has almost hit the -300 point mark for the Dow and is looking to close with the largest one day drop we have seen for a while.

Moving the opposite of stocks today is the VIX level. VIX (the S&P Volatility Index) is currently up 25%, which is an extremely large one day increase. Historically, stocks tend to move the opposite direction the VIX graph does. We saw record setting VIX levels during February of 2009, when the market was at its lowest. Graph trending does not look good for markets at this point and start to look in options for some serious returns, as risk premiums tend to increase with the VIX.

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Has Retail Hit a Ceiling?


Nobody should be surprised nowadays when the market opens the week in the green. We have now consecutively closed a Monday's trading day in the positive for 3 consecutive months. Call it whatever you may, but the fact is, taking long positions just before close on Fridays is starting to sound like a guarantee return. Today was no different after responding to Friday's big down day by having the Dow close up 143 points. Not too shabby for a Monday.

Just as I figured on Thursday and wrote about, we saw a lot of people close out positions during Friday's trading. For those who took advantage of the selling, saw some good returns by close. Hopefully, you got out before close, as most of those gains were taken away today. This week, all eyes are on unemployment. It is clear that consumers have been much more active the past couple months. You can see that by your neighbors new car or house add-on, no parking spaces at the mall anymore, or the long wait at your favorite restaurant. It is pretty evident that people are out spending. Now the big question is, is this real consumer created income being spent or is it just government money? Is this extra cash that consumers are enjoying because they no longer pay their mortgage? I know a few of those. Friday will help diagnose whether the consumer spending is being backed up by an increase in jobs or if we are all somehow increasing our discretionary income somehow. Expect to see some volatility the closer we come to the announcement, especially starting Wednesday.

I said in post a couple months ago that retail should go for a nice little run in the short term. Indeed we have seen that come to pass. Retail stocks have rebounded substantially, with the help of positive earning reports and the overall market getting a boost. However, I did also give a disclaimer that I felt the boost would be short term and soon become overbought. Well, I believe we are getting closer and closer to that overbought stage. The above video, which was posted by MPTrader.com, discusses the recent movements of retail and gives some graphical evidence of why we should be seeing a correction shortly. It is clear retail is overbought at this point, but that fact alone has not stopped other markets (financials and energy) to continue to go up. However, coupled with some graphical momentum, I would say a soon turn in retail stocks is a pretty good bet.

May has officially begun and we will soon find out whether or not we are in for the usual May decline. Bulls would love to see yet another strong correction opportunity be overcome by even more buying. I do see mid May being a difficult time to keep support levels, even with a positive employment report.

BP continues to have its problems while dealing with clean up with its recent oil spill in the Gulf. Expect their stock to be a dog for the time being, as this kind of press is rarely good for consumer confidence. These situations tend to cause for an overselling of stock at a certain point, so a pick up of some BP in coming weeks could be a good play for a nice quick 5-10% correction as it gets oversold. At any rate, markets may be boring tomorrow but I expect to start seeing some more movement as we get closer to Friday. You may also want to consider just packing carry-ons from this time forward, as airlines have made an estimated $7.8 billion last years just on fees. Maybe you should just rent the skis. Ya, that policy won't be going anywhere for a while. Happy Trading.

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