ANOMALOUS MATERIAL

The market could use a breather for a week or two. It’s very likely we will see some sort of notable retracement at some point but the dip will most likely be bought into like all the previous ones since March. Some profit-taking is normal and there is no sign whatsoever that tells me this is going to be any different. Just keep in mind that at some point, the powers-that-be coordinating this rally will take the opposite side for a nasty pullback. The game so far has been to pullback but never enough for institutional money to get fully comfortable getting long, probably explaining the light volume. Rinse and repeat over and over again. When the market sells off on good news and pulls back enough for an “ideal” entry for buyers will probably signal an intermediate term top.

Next week is a little light on the economic data side but earnings’ season is now in full throttle with Apple on Monday something to account for (watch for distribution on Tuesday). Levels to watch on the SPY will be 110 area for upside. 108.20 for short-term gap support, 106.20 and 104.70.

Economic Data:

• Monday: Fed Bernanke Speaks (11AM)
• Tuesday: Building permits (0.59M), PPI (0.1%), Core PPI (0.1%), Housing Starts (0.62M),
• Wednesday: Crude Oil Inventories, Beige Book
• Thursday: Unemployment claims (516K)
• Friday: Existing Home Sales (5.39M), Fed Bernanke speaks (8:30AM)

Earnings:

• Monday: BBT, HAS, AAPL, BSX, TXN,
• Tuesday: BK, CAT, COH, KO, DD, LMT, PFE, UTX, UNH, GILD, ISRG, YHOO
• Wednesday: MO, BA, LLY, GENZ, MS, NOC, USB, WFC, AMR, EBAY, VMW
• Thursday: MMM, T, DAL, DOW, EMC, FITB, JBLU, KMB, MCD, MRK, NUE, POT, AMZN, AXP, CA, COF
• Friday: /

Weekend Reading:

• 10 rules from Michael Jordan for maximizing your competitiveness (Golf Digest)
• Inspiring story: “Trading my Life” – two parts (Flyboys Fund): Make sure to read the second part and leave a comment
• The Banking system is still broken (WSJ)
• Focusing on the process instead of the result (SMB)
• More on making a good trade (SMB)
• Bull Market Check-up (Bespoke)
• Why is the media so optimistic (Naked Capitalism)
• Bank of America misses everything (NY Times)
• Proactive trading instead of reactive trading (TraderFeed)

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GS and C reported better than expected earnings before the open but the market had already fully discounted that, leaving the market to a quiet drift (nothing new right?) until mid-afternoon when the S&P 500 pushed to new highs not confirmed by the Nasdaq, Russell 2000, or XLF. A pullback after such a run is nearly a certainty so trade carefully over the next few days. There is no reason to be trying to pick a top however, I will keep playing long until the setups are broken. My guess is any pullback would be short in duration and we will make another new high afterward but that’s just a guess. Trying to predict the market will hurt more often than not. Tomorrow is OPEX Friday, I don’t expect anything wild as most of the action usually occurs on OPEX Wednesday, this could be another doozer. Lastly, I made available a sample trading journal for download. Go back to the main page, and it will be the first sticky post. Let me know if you have any suggestion.

Econ data: TIC Long-term purchases (10.9B), Capacity utilization rate (69.8%), Industrial Production (0.1%), Prelim UofM consumer sentiment (73.6)

Earnings:  BAC, GE, HAL, MAT

Evening reading:

• Dark pool plans by SEC may limit growths as trading quadruples (Bloomberg)
• Stocks rises into thin air again – 20% above 200-DMA (Trader’s Narrative)
• Miraculous survivors: Why they live while others don’t (CNN)
• How to grow 100 lbs of potatoes in 4 ft square (Tipnut)

Popularity: 1% [?]

As expected, indexes gapped up significantly at the open and drifted sideways for most of the day until mid-afternoon when a wave of buying sent the Dow Jones Industrial above 10,000. The market is now extremely extended and it is natural to see some profit taking after such a running spree, or I mean a gapping spree (4 gaps in 7 sessions).  Be very wary of initiating new long positions until some semblance of consolidation/pullback has taken place over the next few days (CPCE = 0.46 today). The USD continues it trek toward the low 70’s and is now decisively below previous support, which could accelerate its decline. Tomorrow is a huge day in terms of earnings with Citigroup and Goldman Sachs reporting before the open and Google after the close. Also some econ data on tap which could also move the market at the open. Earning season is now in full throttle and technical don’t apply as well so it is definitely possible that we continue a little higher especially if the dirtbags at GS and C had a great quarter scamming taxpayers and the econ data doesn’t get in the way.

Econ data: Core CPI (0.1%), Unemployment claims (525K), Empire State Manufacturing index (18.4), Philly Fed Manufacturing index (12.4)

Earnings: AMD, C, GS, GOOG, HOG, NOK, LUV

Evening Reading:

• Trading setups to consider (SMB)
• US Dollar drops despite officials’ plea: Hilarious title (Marketwatch)
• Wall Street Smarts (NY Times)
• Still on the job but at half the pay (NY Times)
• Winter movie preview (Here)

Popularity: unranked [?]

More of the light volume chopfest (last 5 sessions really) so it is crucial to trade lightly on days like today when you don’t see as many stocks to toy with, unless you want to make your broker rich. INTC reported better than expected earnings after hours so expect to see some strength especially if JPM cooperates (7AM ET). Also a nice batch of economic data pre-open and the FOMC Meeting minutes in the afternoon to be aware of. There is no reason whatsoever to be short for more than a scalp at this point but continue to watch for more clues of a potential topping process as part of a short-term pullback. If we gap up tomorrow, which looks likely at this moment, it will be the 3rd gap up in 5 sessions and the 4th in 7 sessions, which makes the market quite extended any way you see it. On the bullish side (for now), the USD is on the edge of the cliff once again so keep monitoring it.

Econ data: Wednesday: Core retail sales (0.3%), Retail sales (-2.0%), Import price (0.3%), business inventories (-0.8%), FOMC Meeting minutes

Earnings: ABT, JPM

Evening reading:

• Falling upward: Many SECers who failed to catch Madoff haven’t paid a price (TPM) – thanks Kav!
• Are young workers already facing a depression? (Housing Time Bomb)
• HFT is not why you got screwed up on that trade (Business insiders)
• Goldman on tap to dish out massive bonuses again (NY Times)
• INTC EPS 33c vs 28c exp, up 4Q guidance 5% (Yahoo finance)
• Civilian goals unmet in A-Stan (NY Times)
• Zombieland review: Decent entertainment but I don’t get all the praises (Here)

Popularity: 1% [?]

Next week is a huge week with earnings from bellwethers such as GS, GOOG, and GE. How the market reacts to the earnings will set the direction of the market for the next few weeks. From a technical analysis standpoint, it is tough to trade the market during earning season because stocks often react unexpectedly but earnings do make for a very compelling period in terms of intraday trading with no dearth of stocks in play.

Indexes continued higher on very light volume Friday. I still expect Thursday’s opening gap to be filled short-term but we are really close to testing previous highs near SPY 108. Levels to watch for early next week will be SPY 108 for signs of resistance, 106.40 for a potential gap fill back. The next couple weeks will be an ideal day trading environment but at this point, I would be wary to hold anything overnight until the smoke clears as to how the market reacts to Q3 earnings. Continue to watch the dollar as it continues to tip the market one way or another (although that relationship was decoupled on Friday)

Economic data:

• Tuesday: Federal budget balance (-77.3B)
• Wednesday: Core retail sales (0.3%), Retail sales (-2.0%), Import price (0.3%), business inventories (-0.8%), FOMC Meeting minutes
• Thursday: Core CPI (0.1%), Unemployment claims (525K), Empire State Manufacturing index (18.4), Philly Fed Manufacturing index (12.4)
• Friday: TIC Long-term purchases (10.9B), Capacity utilization rate (69.8%), Industrial Production (0.1%), Prelim UofM consumer sentiment (73.6)

Earnings:

• Monday: SCHW, FAST
• Tuesday: INTC, JNJ, NG
• Wednesday: ABT, JPM
• Thursday: AMD, C, GS, GOOG, HOG, NOK, LUV,
• Friday: BAC, GE, HAL, MAT

Weekend reading:

• HFT, short-term focus, boost technicians (WSJ)
• FHA in deep trouble (NY Times)
• Citigroup: Where did all the volume go? (WSJ)
• The alignment of asset reflation and a collapsed economy (gregor.us)
• Position sizing as risk management (trade2win)

Popularity: 1% [?]

Another gap-up-and-go-sideways-day index-wise. Nothing has changed as a retest of the highs seems likely but don’t expect much movement until the bulk of earnings season is underway starting next Tuesday with bellwether INTC and JNJ. My guess is we retrace back some and possibly fill the overnight gap tomorrow or Monday. The Dollar is once again at an important juncture and threatening to break down lower so keep an eye on that.

SPY (15-MIN): Intraday look

Friday: Trade balance (-32.7B)

Evening reading:

1. Trading into a position (Wall Street Cheat Sheet)
2. The Dollar-adjusted S&P500 (FT Alphaville)
3. Is the Dollar in trouble? (Economic Disconnect)
4. Afghan war Debate now leans to focus on Al Qaeda (NY Times)

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Tight range trading today and as stated yesterday, it still looks likely that we will retest the highs and possibly continue higher. Alcoa (AA) beat after hours so this could set off another wave of buying. The market has proven time and time again that it wants to go higher and every pullback has been bought into. There is no reason whatsoever to be short at this time.

Thursday: Unemployment claims (543K), Wholesale inventories (-0.9%), PEP, MAR report

Popularity: 1% [?]

First post on the new site: Update your bookmarks! Everything is still under construction and I encountered some fairly minor issues but I’m glad to move away from Blogger. Wordpress is far and away a superior platform and running it on its own allows for a lot more flexibility and control of the blog. I will lose some traffic for a while but that’s the price to pay.

Nice trading range today. Indexes gapped up big time at the open (for practically no reason) and moved higher in morning trading. We then saw a strong reversal in mid-afternoon but buyers were able to protect the overnight gap into the close. It appears as if the market is going to retest the highs as we gapped up above an area of potential resistance. If you are still short the market, be very cautious although a retracement to fill that gap could be seen shortly. Earning season officially starting tomorrow with Alcoa. Expect a lot of volatility the next couple weeks.

Wednesday: Non econ data. Earnings: AA, COST, MON

Evening reading:

The HFT Debate gets down and dirty (Zero Hedge)

Using longer term levels for intraday trading (SMB)

Money on the sideline is a myth ok?? (WSJ)

Goldman has an image problem (Felix Salmon)

Popularity: 2% [?]