“Não diabolizo projetos” como a mina da Lagoa Salgada

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[homemdoswarrants]

Techs take the lead late yesterday in the US as momentum only knows one direction: UP!


Late US reversal puts the bearish scenario at risk yet again. We'll keep our short outlook for now, but a short term long or two for hedging may be warranted.





Today's Stock Market View
Trader's Note: Yesterday's action did not confirm the bearish scenario as I had hoped and throws me back into a neutral stance. I'm keeping the trade positions in the sell position, nonetheless, since the stops are quite tight. I'm also scanning the radar for a few very short term long candidates as there are plenty of bullish charts out there in a runup like we've seen of late - overblown momentum or not. Interesting to note that techs are leading the charge this time around as the DOW and SPX did not make a new high yesterday as did the Nasdaq futures.

Economic Items This Week:

Wednesday: Trade Balance, Fed's Beige Book, Earnings report after market close from Intel (INTC), Apple Computer (AAPL), and Yahoo! (YHOO),
Thursday: Initial Jobless Claims, CPI, Advance Retail Sales, Empire Manufacturing, Philadelphia Fed
Friday: Industrial Production, Capacity Utilization, University of Michigan Confidence
The rest of the week offers plenty of interesting earnings reports and economic data as you can see from the list above - a minefield of risk for longs and shorts. This market is white hot - it seems that the only direction for now is up, but as I have stressed in previous columns, risk increases in these kinds of situations. Just have a look at SAP - which after its earnings report today sank over 7% before recovering slightly.

Trading Strategies
The SAP AG (SAPG.F) report out today show how currency risk can affect European stocks compared to their US counterparts as SAP disappointed. Remember during the US earnings season that large American multinationals who are reporting earnings have the wind at their backs with the last 12 months 20% devaluation of the USD. This is no small consideration. Traders don't care for now - but fundamentalists are out there sharpening their pencils and noting this for future quarters...

Yesterday puts us back in cautious territory on the short side. If you are tempted to join the bullish tidal wave, have a look at QLogic (QLGC.O) - which yesterday staged a technically significant reversal of the recent selloff. They report earnings on Wednesday after the close - and may be worth buying on speculation that someone in the know is doing the buying. Place a stop just above yesterday's low.

Another buy candidate is Amazon.com (AMZN.O). The consensus is that, while retail sales may not have surged as hoped, online sales have rocketed forward considerably - especially due to gift certificate buying. Amazon is a highly leveraged company with fairly thin margins - but better than expected volume through their infrastructure could mean considerable upside earnings surprise on a percentage basis. Amazon.com has been trading in a range for some time now - but with the last two days' action, may be poised to break above the key 55 area on the way to possibly retesting the top just above 60. Stops can be placed just below yesterday's low.

Market Technicals
Note: Comments below are for the MARCH future for the respective indices.

DAX - the DAX future has edged higher for the balance of the day after jumping slightly at the open to price in the bullish close in the US. Barring a push beyond 4075, we keep expectations for a sell-off to materialize later in the week as the DAX may break back below the 4000 area support on its way to 3920 and then 3850. Trade Positioning: Short with a stop at 4085.

FTSE-100 - the FTSE future has lacked life for the balance of the day and has responded rather passively to bullish markets elsewhere. The FTSE may decline again in the coming days until it is again firmly mired in it's old range between 4300 and 4400. It may fall to 4215 further out. Trade Positioning: Short with a stop at 4505.

Nasdaq-100 - The Nasdaq-100 futures are the hottest of the hot for the moment and surprised again to the upside. The futures may have one last blast higher today or tomorrow to 1560/70 before beginning a correction that initial sees the future settle back to 1500 and possibly even 1465. Trade Positioning: Neutral.

SPX - The SPX future may edge marginally higher in the coming two trading days, but may then correct back to 1075 support and eventually 1030. Trade Positioning: Short with a stop at 1140.

Dow - The Dow futures may edge slightly higher today and tomorrow after showing resilience to any further selloff yesterday. A correction may then materialize that takes the index back to 10100 initially in the coming days. Trade Positioning: Short with a stop at 10590.

January "Six Pick" Strategies
Update (Jan. 13 - premarket) Would take profit on Tiffany and Co. (TIF) with the upcoming retail sales report and since it can hardly be expected to gain even more downside momentum at these levels. Would also put a stop at 44.25 on Merck after yesterday's downgrade from some broker sent it tumbling.

Update (Jan. 9 - premarket ) After Ryland came out with sales disappointment yesterday, would close this position shortly after open today for profit. I would also put a stop order at 48.45 on BUD after the big selloff. Apparently folks haven't been enjoying beer while they're buying stocks...

Update (Jan. 6): It's perhaps time to take profits on one of the housing stocks after such a lucky run - I'll take the virtual TOL position off if the price is below 38 in trading today. (Note: In the first 1 minute of Jan. 6 trading, TOL traded as low as 37.93 - so in the real world, a limit order would have been hit, but probably executed slightly above 38...)

(Prices updated with Jan. 12 close)

Stock Name Buy / Sell Entry Price Current Price P&L
RYL The Ryland Group Sell 88.64 72.75 +17.93%
TOL Toll Brothers Sell 39.76 38.63 +2.84%
TIF Tiffany & Co. Sell 45.20 40.87 +9.58%
MAY May Department Stores Sell 29.07 29.82 -2.58%
BUD Anheuser-Busch Buy 52.68 50.82 -3.53%
MRK Merck & Co. Buy 46.20 45.90 -0.65%


The six stock trades above are those that I have chosen for my January Strategies. Entry prices for these theoretical trades are simply the closing price on December 31. I'll assume that I must hold them for the entire calendar month of January, and report the results accordingly. But I will also indicate when I would take profits/losses during the month, if I feel that a technically important level has been reached either way

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