Ten years or so ago Shania Twain came out with a hit song âThat Donât Impress Me Muchâ. I can still see my sister when she was 11 or 12 years old prancing around and singing it like it was her theme song. Every time I hear that song on the radio it cracks me up and I start laughing like I was infected with the stupid virus. What the heck does that have to do with the markets you ask? Nothing, itâs like Tony Sopranoâs mother once noted âItâs all a big nothing!â Well, maybe not, I must say that this markets action the last few days certainly has not impressed me too much. What have we seen? Well, pretty much the exact opposite of what Iâd like to be seeing: Weâve been selling off on heavy volume and rallying on light volume. This is never a good sign. Some signs of strength should be noted though, that the 50 day moving averages have held (in many cases to the penny) across the board, that leading stocks have not yet broken down etc and people got bearish really quickly as soon as we had a little tiny bit of selling. This to me was just amazing as I trolled the message boards and chat rooms, the bears all came out of hiding very quickly to note how smart they are and how stupid anyone who is bullish is. Typically when they come out that quickly its not for a long lasting party, unfortunately.
So what did happen Friday? Well not much until about 1:30. I was about ready to give up and go watch Soaps or Judge Judy- the market certainly was not providing too much by way of entertainment. Then the rumor of a US Steel (X) buyout appeared and low and behold the market was goosed and off to the (very low volume) races. Where do people come up with these stupid buy our rumors anyway, seriously. If all I did was chase my tail trying to anticipate the next buyout Iâd probably have better cardiovascular fitness, but thatâs about it. Iâm pretty sure one thing I would not have is money. Another notable stock in the market was National Semi (NSM). Things continue to go downhill for them, but the market did not seem to care on Friday as the stock was one of the leaders on up volume for the day, and not only did the stock itself move higher, it provided a certain catalyst for the entire sector, so the Semiâs stood out as a clear leadership group on Friday
So, the big question is what to do? I mean all this time rambling about Shania does not exactly accomplish too much does it? Well, Iâm still of a mind to be patient. I know a lot of traders who feel the need to jump on every move, guys who seem to be physically pained if they miss a move. For the most part all of them end up being âformer tradersâ rather than âcurrent tradersâ, but they always seem to form a large part of the Internet crowd, and for sure they have been out the last few days ready to pounce, I mean it would be a shame to miss that first one or two percentage points, if you donât get that you might as well go back to Wendyâs!
I have always been of the opinion that it pays to pay attention to relative strength. Iâve always wanted to be sure I know which stocks are behaving better than the overall market (which is why I love pullbacks in up markets, because how else are you going to isolate strength but by exposing it to potential weakness) or worse than the overall market. Right now a number of stocks are showing favorable traits, and held up very well when the market did not. Names such as PVH, RIMM, MCD, GES, CPLA, APD, MGRC, SIVB, MTN, SAY, SSYS and GRMN for example all have my interest. Not all of them are buyable at this point, many of them still need to build new bases, but some such as SIVB, MTN, MGRC etc have potential at this point should they break the bases they are currently in. On the short side there are a lot of things out there that interest me as well. With the bond market in its own private bear market here (and it is in a bear market) a lot of sectors are getting hit hard, and should continue to get hit hard. Utilities are always interest rate sensitive since they tend to borrow heavily. Names such as DUK, EXC, SO, and XEL are showing a lot of weakness and will probably offer more shorting opportunities. At this point Iâd like to see each of them either trade sideways a little or rally slightly, but the utility sector is in a bear market at this point and worth watching for short side trades. I also see a lot of retail names breaking down, this is a bigger theme Iâm going to be keeping a close eye on as well, but for right now moves lower in SMRT and BEBE defiantly look shortable to my eye. Finally the homebuilders, poor, poor homebuilders. They did manage to rally back a little bit on Friday, but it was again ânot impressing me muchâ and this is a group that will likely continue to have a hard road. Names like DHI, PHM and TOL for example seem weaker than the rest and are probably worth keeping a sharp eye on. Finally there are a few stocks just out there all by themselves showing weakness, names such as BRCM, NCC, LPX (although LPX being a wood stock could fit into the whole higher rate thing).
At anyrate, thatâs what I got for today. Hope it helps someone. If it does send me a Giordanoâs Pizza! (you can order them off their website, I have no objection to giving you my address if ya want to get me one J ). If its not helpful, well, you can always send me a Giordanoâs and hope it gets food poisoning on its way to my house!
of trading. About 11 or 12 of those guys are running sites of their own now and doing quite well, including Bo Yoder, Ivica Jurasic, Jens Clever etc. Also a number of guys are runnning their own money, a couple of them more than I am, many others trade their own accounts successful. Of course there are also many that for whatever reason did not make it, most probably got bored waiting for a perfect setup.