FRIDAY JUNE 6 THOUGHTS

On Wednesday afternoon, among other things, Fed Chairman Bernanke said that the economic slowdown in the Untied States was due more to housing than rising oil prices and that a repeat of the economic malaise of the 1970’s was unlikely. However, he also said that the US has a ‘serious’ oil shock, inflation expectations are a ‘significant’ concern with it much’ higher than we would like,’ and that the Fed is responsible for 'stable prices over the medium-term.' Why the doubletalk? Is it because he is uncertain as to the economic outlook? Maybe. But far more likely is the subtlety of this statement. During the last handful of Federal Reserve meetings when interest rates were cut, he focused far more on housing than inflation. In the last statement, he ostensibly indicated it was an equal concern. Now, he is turning his immediate focus to inflation which signals that not only will the Fed cut interest rates, in fact, there is more an outside possibility that rates will go up. This indicates two things. First, if the financial system gets in trouble anew, the main Fed tool (cutting rates) is not at its fingertips and they will have to resort to far more desperate measures to rescue the economy as they did in assisting J.P. Morgan. Second, inflation is clearly a worry. Thus, the Fed is trapped right now but ready to act. Thanks. It does indicate that things are a bit more precarious than otherwise thought; they cannot raise rates to curb inflation out of a fear that the economy does not need another shock yet they cannot cut rates should the economy truly tank. The net of all of this: Who really knows? Except that if the Fed is this nervous about the inflation that we see in front of our very eyes on a daily basis, it indicates that there will be rapid and violent rate hikes should the economy prove to be on solid footing. And for day traders, it means that a 6 dollar move higher in oil in a day could be viewed as a positive one day because it indicates worldwide demand is strong, but bad the next because it indicates interest rate hikes could be coming.

Overnight, markets in Asia were up as well as in Europe, but the gains were leveling off as the day progressed in Europe. Oil was sharply higher yesterday and continued higher this morning. Also, the jobs report is due out which will help to give direction to the market, but unless it is particularly divergent from expectations, it likely will not have much of an impact (althoug hit is more likely to have a negative impact than a positive due to the rise in the markets yesterday and the pre-indicator jobs report Wednesday morning).

ISPH- has almost doubled this morning on positive data from a phase III trial. Stock has been over 7 as I type this. If 7 relaods pre-open (and hopefully, I will get this out in time), it is a great short.

APWR- good earnings. Stock should open nicely higher. A-B-A2 here. If it opens at say 25, falls to 24.75, and rallies back to 25, it is a buy.

TSL- other terrific play of the day. It has run-up a lot. If it posts better than expected earnings and tries to rally but fails, short everything possible when/if it goes negative on the day.

SINO- has been bludgeoned over the last few days. if it opens a little higher, falls back to unchanged, and begins rlaly, it is a buy.

NTI- momentum could shove this stock dramatically higher...no definitve trade off-hand, but keep an eye on it.

MDZ- closed very weak yhesterday. In a weak environemnt, looking continuation short thr unew low.

TRX- closed near its high. If the stock opens down, look to buy it thru unchanged.

SLB/ most oils- way up yesterday. If it opens down, buy thru unch. But with oil higher, the better play may be that if it opens higher, short thru unch.

CMTL- up a lot yesterday on earnings. if it opens down, loking to buy thru unchanged and more at 50 with a quick out if 50 reloads.

SQNM- has been up on huge volume two days in a row on news. if it opens down, buy thru unch.

WIN- Cramer last night pumped it up.

GENT- down on terrible drug news. reverse A-B-A2. if it opens at say 4.50, rallies to 4.70, and falls back, short 4.50.

BUCY/JOYG- Cramer as well; BUCY way up and JOYG flat. Do not know what to make of it.

GEOI- odd. Doing a private placement at 22.50- six points below market. Stock should open above there...if it ticks below 22.50, short it. if it opens way down, but holds, it'll be an A-B-A2 buy.

BAC/CFC- merger approved last night. Do not know what to make of news, but will watch.

RCH- going to NASDAQ on Monday morning. Stock may be up this morning because of that. I know. Silly. But watch.

FMCN- terrible earnings...stock seemingly off of its low from last night...may rally post-open that much more.

Have a good weekend and good luck today.

THURS. JUN. 5 THOUGHTS

A bit of an odd happenstance the last few days has been the divergence of the performance of the broader sector and the tech sector. With the Dow down 100 points (0.7%) on Tuesday, the NASDAQ was only down 11 (0.4%). With the Dow down 12 points yesterday (-0.1%), the NASDAQ was up 22 points (0.9%) . What does that tell us? People are shifting monies from sectors/commodities such as oil and banks to tech particularly after the MBI/ABK downgrade threat. That is not earth-shattering. What is notable is that it indicates a palpable lack of fear in the markets much less an abject indiscernible interest in LEH, MBI, and ABK. The ‘scare’ factor in LEH just is not there and people just don’t seem to care about the MBI/ABK items in the immediate-term. This would indicate that money is not necessarily going to money heaven off-hand; rather, it is being jostled around from sector to sector. Is there any guaranty that tech will stay stronger than the broader sector? Of course not. But that does lead to two prescient points. First, there would not seem to be an impetus (LEH aside) for a major market move right now. Thus, the way to day trade is to follow the hot money of the day. And point two- the hot money of the day tends to last for only a day or two rather than weeks on end right now. Just because tech is tops and oil stinks right now does not mean it will be the inverse tomorrow. So, keep be exceptionally quick on the trigger as the strong and weak sectors become almost interchangeable on a day-to-day basis for awhile.

Everything is as quiet as quiet can be right now. Foreign markets are mixed and little change. Commodities are little changed. The dollar is strong. But, the bias state-side is higher this morning with LEH seemingly stabilizing and tech showing an upside move in the early going.

The news flow continues to slow; day trading is hard as is, but it is going to get progressively harder with lack of news flow so not a ton of good thoughts this morning trade idea-wise:

CIEN- good earnings; stock has traded between 31 and 31.80 in the pre-open. Will use those extremes as entry points, i.e. short below 31, buy above 31.80.

ADCT- good earnings as well. Stock has traded between 16 and 16.50. Will short below 16 and buy above 16.50.

ROYL/WNR/SUN/VLO/most other oils- many of these stocks were crushed yesterday. Using the A-B-A2 thinking today; if for instance SUN opens at 44.50, goes down to 44.20 and comes back to 44.50, buy at 44.50 particularly if oil is inching higher.

LEH/GS/MER- all strong as LEH situations seems to be holding. If LEH in particular goes toward unchanged, short it and watch the other brokers.

CMTL- bid up strong on good earnings. A-B-A2. if it opens at something like 48.50ish, falls to 48ish, and rallies back to 48.50ish, it is a buy.

Airlines- all strong as several were upgraded. Don't know if there is a trade here, but keep an eye on them.

Good luck today.

ProTrading Network

As you can see, ProTrading Network has begun its recent expansion to its trading services. We would like to welcome you to join us in our Daily Blog, Chat Room, Educational Services, Software Solutions and Trader Employment.

Thank You,

, President

WED. JUN. 4 THOUGHTS

In March 2008, sheer panic and paranoia took over Wall Street. The fear of something bad happening became a self-fulfilling prophecy. At the center of this storm was Bear Stearns (formerly BSC). Bear Stearns as many people recall was the brokerage house with the most exposure to mortgages. The stock fell rather dramatically from around 180 to around 100 over several months at which point several investors decided it was worth a shot at buying in. The stock popped for awhile, but began to give way again in early March. Within a week, the stock lost over 90% of its value. What changed in a week? Not much except that the perception became the reality. And the perception was that Bear Stearns would not survive the credit crisis. So, many Bear Stearns clients began yanking their funds from the company and it snowballed. Fear was palpable and the day that Bear Stearns effectively ended its independence (March 17, 2008), the stock market set its lows for the year. Many other brokerage stocks fell with Bear; one of the more notable was Lehman Brothers (LEH). The stock fell an incredible 60% in a handful of days from around 50 to around 20. Three days later, it was back at almost 50 as the liquidity crisis abated. Guess what? Lehman is back down to around 30 on yesterday’s close. This second leg down seems a bit hollower; the fear is not there and Lehman has ample liquidity. But, a force more important than oil prices much less anything else may take hold this summer- the fate of Lehman. That stock will likely be the major indicator as to the direction of the financial system. So, add it to your watch list and track it daily. If everything holds correctly, the stock should not proceed toward 20, but if it breaks 20, it just may follow in Bear’s footsteps. This will lead to “Who’s Next” and could be a very scary time for the stock market. But, again, for now, the new ‘oil’ just may be LEH in terms of what people are watching.

Overnight, Asian markets were generally higher, but the trend reversed in Europe as fears over more writedowns grows. The declines range anywhere from 1%-2% for the bourses as of this writing. Bonds are higher on these fears and oil is down a little more. Futures are down a bit this morning albeit not as much as one would think based on the gloom pervading Europe right now.

LEH- down again pre-open. It traded to 28 already, down 2 1/2 on a "WSJ' article implying the company is going to seek capital from a European entity. Day trading will be treacherous again in this thing with the best plays having already been completed in it before 8AM this morning. Only 'obvious' trade is to buy it thru unchanged on a short covering rush. The much harder idea is if the stock opens at say 30ish (point A), rallies to 30.25ish (point B), and falls back to 30 (A2), short below A2. Numbers not exact...just giving an indication of the thinking. Again, that latter trade is much more dangerous so have a quick trigger out, i.e. if you sell at 29.95 in that example and it gets over 30, get out immediately.

GS/MER- will likely move in loose tandem with LEH.

STT- doing a major share offering at 70. Stock trading above 70 at this writing...best trade in it is to short 69.99 if it trades below 70 because it indicates the institutions/secondary offerers cannot hold the stock up. Conversely, if the stock opens below 70 and goes above, it is a buy at 70.01.

GRO- way up yesterday on not much of substance. If the stock opens higher this morning and the market weakens, it is likely a short at unchanged.

GES- up on decent earnings. Not great, but decent yet the stock is showing impressive strength. A-B-A2 again. If say the stock opens at 41, falls to 40.60, and rallies to 41, buy it at 41.

ROYL/ROSE- small energies up a lot yesterday; if they open a little lwoer and get positive, buy them.

SINO- has been bludgeoned since the day after its IPO. It is down 50%. If the stock opens up a little (say 13.25), goes to unch and holds, and gets back to 13.25, buy it. numbers not exact...again, A-B-A2.

Morning earnings- HOV, VIP, VOL, WSM. Afternoon- ADCT, CMTL, FCEL, FIF MATK, PSS, SBLK

Not a lot news-flow wise...be careful today.

Good luck.

TUES. JUN. 3 THOUGHTS

In the face of a more volatile environment, two lessons need to be re-imparted. First, do not be scared of a situation simply because of volatility, the price of the stock, or over thinking. Second, realize the importance of individual trades- namely, one trade can quite literally make or break a day. This is an extraordinarily important theme to be hammered home should yesterday’s mid-afternoon sell-off help to spur further volatility in coming days. To better explain this, let’s discuss one of the items of note mentioned in this space yesterday. Yesterday morning, Goldman Sachs (GS) was upgraded. The stock initially rallied, but with all of the other financials down, GS gradually caught up. This is where the style of trading – “common sense trading”- that we attempt to do comes to play. We need three criteria to fall into place- news, stock action, and market action. In this case, the news was the upgrade- which the stock was not reacting to. Thus, if a stock cannot go up on good news, the likelihood of it eventually falling increases exponentially. Second, the stock had just gotten negative on the day at 9:50AM and failed t orally. Third, the market was gradually weakening. This is the “perfect” intra-day set-up. There was 75 cents to a dollar to be had in this stock in less than a minute once it truly broke down. Again, the good news did not work, the technical pattern was weak, and the market was breaking. That trade literally made the day of some traders. However, most other traders glanced at it yet stayed away out of fear simply because of the price- all the while scalping and losing in other stocks. The two lessons here as we enter into a more volatile spate- do NOT be afraid of trades like this and do NOT underestimate how vital a trade like this day can be to your account balance. Just because a trade seems dangerous, when those three aforementioned factors are in place, it does not get much better and is in fact a safer situation in the electronic day trading game than most trades.

Overnight, markets overseas were quiet...all markets...currencies, commodities, equities...quiet.

LEH- trade of the day if not the week. It may well have gone by the time this is posted. It was beaten down yesterday on rumors of a needed recapitalization. This morning, the "WSJ" had a similar story. The stock should be down. If the market is strong which defies logic re LEH and LEH approaches unchanged, buy every share of it that you can stomach around 33.60-33.70. Risk 10 cents with a potential for a 40-60 cent profit. Conversely, if it happens pre-open, and the market weakens, it is a short thru unchanged. But focus on that first one big-time. if the stock stays negative pre-open, at any point it looks to go positive, buy it.

WHQ/SII- WHQ being bought out for .48 SII shares and 56 in cash. SII is being diluted so it should be down today. If it gets to unchanged, buy SII.

MA/V- MA rallied 15 points on the close yesterday. And it was upgraded this morning. it still should be down this morning...if by some chance MA gets to 320, buy it.

ROYL/ALJ/WNR/PDO/MXC/ROSE- all tiny oil companies way up yesterday. Watch for either short thru unch set-ips if oil weakn or utilize the A-B-A2 pattern in seeking buys.

AUXL- bad drug news. Stock was drilled pre-open down to 26ish. if it gets thru unch, it is a buy because it could not go down on the news.

COR- should trade down; will buy thru unch on momentum.

Earnings- NCS/TOL out pre-open and SAi/BOBE/GES due out after-hours.

Good luck today.

MON. JUN. 2 THOUGHTS

Frequently, a pattern occurs which has been referred to in this space as an “A-B-A2” action. As this blog gains a bit of a following, this pattern- particularly in this market- should be explained further. Many times, a stock which has major news whether it be earnings, the resignation of an officer, or anything else, a stock will gap significantly higher or lower from the previous day’s close. For instance, Costco (COST) opened up about 60 cents from the close at 73.83 on the day it reported earnings (Thursday May 29). This open would be point A. The stock fell to a low of 73.28 shortly thereafter (point B). When the market began rallying that morning, the stock went back to 73.83 (second time at point A, i.e. A2). Within a couple of minutes, the stock rallied 80 cents. Many many times, this pattern works. The reasoning for this is as such- continuing to use COST as an example- the stock opened higher on respectable earnings, fell as some people got rid of their shares, but immediately turned on a decent up day for the market. When it got to its opening level, many people who were short got nervous and covered as they did not want to hold through the previous high of the day. Thus, the stock spiked back through its opening level. About an hour or so before the market opens, it certainly is not a precise science to figure out the exact numbers at which this type of action will occur; however, it does occur a lot. So, hereafter, make this A-B-A2 pattern your friend; it is one of the major tools used in effective day trading.

Overnight, the summer market doldrums continued throughout most of the rest of the world (seemingly even in parts of the world where it is not summer). The Asian markets were up, but European markets were broadly lower after some bad earnings news from a couple of European banks. Oil is down as well. The futures indicate a weak open state-side as well with a lot of news from the ASCO conference over the weekend, but the only number that will probably Dominant things today is this figure: "77 degrees in Manhattan for a high today."

CSIQ- announced a $500 million contract. Stock surged initially, but has peeled back. Off-hand, the stock wouldseem to be a buy, but it is definitely a short thru unch when/if.

DNA- decent ASCO data; mixed reviews. If other biotechs sell off, I'd be looking to short the thing not long after the open.

IMCL- terrible ASCO data. 40.60ish seems to be major support pre-open. If it gets through there, short the thing.

ACOR- good ASCO data. Looking for the thing to hold 26 bid...will use that as a benchmark number around the open. If it can hold, do the A-B-A2 thing, i.e. if it opens at 26, rallies to 26.30, short 26. Or conversely, if it opens 26, sells to 25.70, and goes back to 26, buy 26.

HRS- Company no longer for sale. Yet, the stock is off of its pre-opening levels. Use A-B-A2. if it opens 57.75, falls back to 57.50, buy 57.75...or something like that number-wise.

PARD-terrific ASCO data. Stock actually not up all that much...should really really rally...if it does not, short everything possible at unchanged.

SOL- share offering. Stock should open down; not looking for a trade here per se. But it is being mentioned because of an artcle in the "Financial Times" of London which indicated dampening demand for all things solar thus it will likely cause many solars to be down today. So, look for little nuances like STP showing relative strength so that'd probably be a buy thru unch.

Brokers- mixed...GS upgraded while LEH downgraded.

Earnings after- hours- LULU and SEED

Good luck today.