Monday, December 1, 2008

MON. DEC. 1- Ray Stevens And "The Streak"

The Chicago Bulls in the Jordan years and, say, the 1998 New York Yankees are very used to winning streaks. The popular 1970's performer even sang a song about "Streaking," albeit a different kind of streak! However, until the last five business days, the Dow Jones Industrial Average much less the S&P 500 had not had a five-day winning streak in 16 months-an absolutely amazing feat. The significance of this is of course almost meaningless except for two things. First, it shows just how incredibly persistent the selling pressure has been. But the major tenet to take from this factoid is that either the market is changing from a bearish to a bullish pocket and/or this is a major short covering squeeze as last week was the Dow’s best week in 75 years percentage-wise. Either way, as we enter what is traditionally the most illiquid month of the year in what has been the worst year for the markets in a couple of generations, it is important to note for us day traders that the environment is changing. The VIX has fallen so the volatility won’t be as drastic in all likelihood, but that just makes things more dangerous. All of us are gonna want things to happen and there will be times when they just aren’t there. So, this is not the usual cautious column…it is an extra-cautious warning. The markets are wild and will remain so, but intra-day, things as evidenced clearly Tuesday and Wednesday of last week in particular had direction, but it was attained only after a lot of shaking. Keep your eyes peeled to all of the macro indicators like bonds, oil, et al, but be aware- there are pockets like last week when none of it matters.

Markets overnight were heavily lower throughout the world. Asian indeces were down 1%-2% while losses intensified in Europe to 2%-3%. Oil is down significantly and the 10 year bond continues its ascent. Look for some major profit taking this morning after the hefty gains from last week. After that, stocks will likely try to stage a small rally, but overall it should be a stagnant choppy day on relatively low volume amid a dearth of news off of the weaker opening.

Reiterating-If the whole story is not there -
If something is good, assume either a short thru unchanged or an A-B-A2 based on direction of the market unless specifiedIf something is bad, assume either a buy thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified-

Good- The following stocks have good news and/or a strong technical pattern

CVG- closed very strong; looking for A-B-A2 thru Fri.’s 6.40 high

SGLP- likely will reverse; however, if it opens lower, looking to buy thru unch at 2.65

TRW- looking for potential A-B-A2 thru 3.78

JEC- continued short covering panic; looking for reversal else A-B-A2 thru 44.90

LNC- closed near high; could be more short covering above 13.75

OCNF- closed strong; looking at A-B-A2 thru 3.50

Bad-The following stocks have bad news and/or a weak technical pattern

SPG, NLY- closed on their lows due to imbalances; if they open higher and get down to unch, short thru unch

RUBO- the stock of this restaurant chain plunged to a new move low on Friday; look to short thru Friday’s low around 2.15ish






Good luck today.


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