17 Mar the Daily Stock Report

The stock market indices like the Dow30, S&P 500 and the NASDAQ Composite moved up from 2.5% to 4.1% for the NASDAQ. The upward surge is attributed to better than expected housing numbers and lower than expected PPI (Producer Price Index), which is an indicator of inflation. CPI (Consumer Price Index) comes out tomorrow and likely will be close to 0% increase.

Stocks were stronger today and most surged up after any morning losses in stock prices. The short positions taken in the financial stocks are still within a corrective cycle although JPM, JP Morgan is a little hotter than expected. JPM has had a lot more favorable news this last week but the banks are very likely to head down part way to the recent lows in the coming weeks. If the banks continue to move up sharply, stop losses could be likely hit but this is a situation where a short position is much higher probability to work than any long position.

BAC, Bank of America is the weakest of the banking stocks along with WFC, Wells Fargo.

Chasing any of these financial stocks long would not be advisable. If there is any area to look, scrounge around for tech stocks for possible long positions but nothing is obviously waving a flag. It is still likely to see selling and therefore, you wont see any new long position recommends except for holding what little stock that remains long.

We have come off a great run both long and short these last 4 weeks and my own personal tendency is to open the stop losses to be wider on these short positions in financials that were opened these last 2 days after outstanding profits in most positions we have had.

It isn’t like the whole world is going to believe everything is right with our economy and banking stocks all of sudden just because we have had some enthusiasm in the last 5 days. This is what we positioned ourselves long for last week, to get much of this countertrend rally as we have discussed several times.

Remember we aren’t going for a home run on these latest short positions we opened, we are trying to get anything the market gives us without expectation these banks go all the way back to the bottom, although it is within the realm of possibilities to get close.

Don’t be deceived that we have not been giving more “new” ideas the last two reports. This is intentional because we are already short a handful of stocks with small (and very small) short positions that shouldn’t hurt you badly if you we allow a wider stop loss to go against us on these stocks AND we shouldn’t be chasing stocks long at this point or getting overly committed to the short side. So you can consider this an “in-betweener” or a transitional period until more stocks come into a higher probability set-up.

REPEAT FROM LAST NIGHT’S REPORT: You could always sit out this current cycle of short positions if you are tired or exhausted mentally. OR a good fix for that is to have a very small position than normal so it won’t stress your nerves but keeps you alert and your head in the game. A rest is fine by having no positions at all but keep monitoring what happens so you don’t totally get stale and indifferent to what is happening in the market. Even someone as good as Tiger Woods will take some weeks or months to get back into tournament play after a 9 month layoff from golf so it is wise to be somewhat updated as to what the market is doing even though you may not have any positions.

The insurance sector, PRU and MET were strong today. Most of you are all sold out of those long positions but don’t stress that you left another 10-12% on the table today. You consistently play the odds and you will do quite well with your money. HIG, and PFG were weak today are likely to turn over first in this sector.

Oil, light sweet crude oil index moved up 3.7% to make a higher high wit $48.60 at the close. This is going to trickle down to what few oil stocks that remain as a long position on the stock list.

Intermediate Trade Positions: New ideas: none

Swing Trades: New Ideas: none. Hold existing small short positions in banks, we should see selling start this week.

Day Traders/Intraday stock ideas: Again, another outstanding intraday trading day. You are going to see big swings with the drop and pop being the best way to handle long intraday scalps. My suggestion is to let the stocks go down hard and focus on a LONG bounce. Your best odds play for intraday scalps are in the first 2 hours of the trading day with drop and pop strategy the highest probability for you. As stocks move down, you should wait longer and longer before buying the bottom for a long sclap. FSLR, HUM, UNH, ICE, BLK, CME, POT, MON, MOS, AMZN, AAPL, FSLR, BIDU, USB, WFC, JPM and any high volume, high volatility stocks. Look for short scalp set-ups in ICE tomorrow.

NOTES: We are entering a cycle where we could be substantially on the sidelines because most of the high probability trade ideas have matured and profits been realized. The odds change as stock ideas mature. Doing nothing in the business of investing or trading is just as valid as making a move going long or short. So it looks like the odds are shifting toward being in more and more cash as we just harvested many long positions.

REPEAT: Many of you have emailed me with questions about not having the $25,000 to do intraday trading. You can have 3 intraday trades in a 5 business day rolling period. You can have swing trades like we have been having the last 2 weeks and make a smaller amount of money, let’s say $10,000, to build up with swing trades.

Thoughts: Keep steady, calm, decisive, aggressive. Have no fear and no greed. Keep looking at what to be doing next in a calm manner. Don’t focus on the past or beat yourself up what you did or didn’t do or what you should have done. Just keep playing the next shot, which in this business your next shot could be just sitting on the sideline.

I am still expecting some sort of substantial rally in the stock market sometime this year mostly driven by the massive stimulus that has already been poured into the system plus the planned stimulus package being proposed now. Longer term though, in a couple years down the road, no doubt the taxpayer is going to have to pay for such the high debt amounts that the US government (and other countries) have taken on. So tax rates probably will rise in coming years, interest rates will very likely have to rise as inflation surfaces and likely the bear market resumes sometime down the road. But we don’t have to be stuck in a miserable cycle like most investors. With the techniques and approach to the market, we will still thrive.

If you have been uncomfortable shorting stocks, which most people are, try to learn this technique, it will be a useful tool in the coming years.

When I list several stocks from the same sector, like the housing industry for example, don’t short all of them unless you are well diversified and it represents a small percentage of your total stock account (in that same account).

Thoughts: Best odds only, be decisive, aggressive, mentally flexible, stay in position size, don’t overtrade and wait a little longer to buy and wait a little longer to sell. You will find that will make you more money on your trades. Trade what you see, not what you hope for. Intermediate and swing trades are really important to have trailing stop losses set.

Don’t trade unless the setup is there for you, then use the charts to tell you when the odds are heavily in your favor. Don’t force anything to work for you, let the setups develop and then take advantage of that. Be patient. Stay in position sizes without letting any intraday trade represent no more than 10-15% of your total account value. As you build your account, your position size percentage should get smaller and smaller to lower your risk.
Have a great day and I’ll talk to you this weekend.