29 Mar the Daily Stock Report

The stock market had an average down day with the Nasdaq Composite down the most at -2.6% but it has gone up the most. The S&P-500 dropped 2% and the Dow30 down 1.87% on Friday. The market is set up to open down tomorrow with the Asian markets down over 2% so far and the financial news headlines are clearly negative.

The Obama Administration forced out Wagoner at GM, General Motors as the government control taking a clear step away from capitalism but with the government is the biggest contributor of funding to GM.

The Treasury Secretary Geither has been on the talk show circuit lately to talk up the optimism of the government’s prospects for rebuilding the economy and today’s appearance on ABC’s “This Week” debatably could be interpreted as a slight positive for the banks for Monday’s opening.

The most likely scenario is a shallow pullback that may have started Friday and if we get several down days with a couple of them starting to scare investors again, then it could be we have more than a shallow pullback.

My current thinking is that we get this shallow pullback over this week or two which would give some of those who are still short banks to cover their short positions, followed by some fairly aggressive buying to higher highs than we have seen last week.

In anticipation of a continuation of this rally that started two weeks ago, we are preparing a collection of stocks that are considerations for long-intermediate term positions that evaluated both on technical, trading action and with some fundamental considerations. These are only to be watched in anticipation of what might be another move up in the market that could start up as early as next week but these stocks are not ready to buy yet. Just start studying and watching them.

Breaking news 936pm Pacific time: About 10 minutes ago, an AP article headlined “Obama denies bailout funds for automakers” was released with the article explaining that neither GM or Chrysler has submitted an acceptable plan to receive more bailout money. The Asian markets have reacted immediately with more selling and now are down more than 4% so far. This will definitely add a more negative opening and tone for the market this week which will help our 11 short positions vs. 5 long.

The market is not likely going to react with an extreme negative reaction on this GM news like we have seen a handful of times these past 5 months because the market has heard this news before. Stocks don’t react twice to the same news with the same extreme; the second time the reaction is more muted but it should give a reason for investors to start selling.

Oil moved down 2.1% to close at $52.06 per barrel for light sweet crude. A mild correction is likely or what technicians call consolidation before higher highs could be made.

Intermediate Trade Positions: Collection of stock ideas to consider buying long after pullback is completed:

UTX, United Technologies
MA, Mastercard
IBM, International Business Machines
TNH, Terra Nitrogen
BIDU, Baidu
AMZN, Amazon.com
BMC, BMC Software
RAX, Rackspace Hosting
SY, Sybase
RIMM, Research in Motion (SWING)
CIEN, Cienna
CREE, Cree Inc
DIOD, Diodes (semiconductor)
SWKS, Skyworks (semiconductor)
UEIC, Universal Electronics
RADS, Radian Systems (SWING)
FCX, Freeport McMoran
GS, Goldman Sachs
MS, Morgan Stanley
MRVL, Marvell Technology
WFR, Memc
S, Sprint
GOLD, Rangold Resources
CMG, Chipotle Mexican Grill (MacDonalds subsidiary,SWING)
BKE, Buckle Apparel
ARO, Aeropostale
DNR, Denbury Resources (Oil & Gas)
NOV, National Oilwell Varco
PBR, Petrobras
USO, US Oil Index ETF
DBC, Commodity Index ETF
GSP, Total Return Index ETF
SMH, Semiconductor ETF

REPEAT: Let market pull back before getting too heavy in LONG positions. Stocks that have been the strongest and pull back the least amount with more of a sideways action are the ones to be watching for long intermediate trades.

Swing Trades: New Ideas: BIG, Big Lots discount stores. This is not ready yet, wait until pullback is over.

Day Traders/Intraday stock ideas: Look for a bigger drop with the negative opening and take longer with more patience before buying any pops tomorrow. Look for good intraday trades in FSLR, ICE, BLK, CME, POT, MON, MOS, AMZN, AAPL, BIDU, USB, WFC, JPM and any high volume, high volatility stocks. Note FSLR was up on renewed interest in solar stocks and a contract awarded to FSLR.

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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 without having $25,000 in your account. Above $25,000 you can do unlimited intraday trades as long as your account equity is above $25k. 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 tomorrow.