General Lack of MoMo Motors

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MARKET WRAP UP 11/17/10

In front of an historically large General Motors IPO pricing this evening ($33/share), stocks put in a rather dull session, as the S&P 500 finished slightly up 0.02% to 1178. While there were some isolated pockets of strength, the lack of a sustained bounce after the past several days of selling made it difficult to make aggressive buys. Looking ahead, the rising 50 day moving average on the S&P, currently at 1167, appears to be acting as a price magnet.

We also remain short-term oversold. While it is most certainly correct that oversold conditions in the market can often persist much longer than one thinks possible, it is also true that during bull runs the market becomes oversold rather quickly before seeing aggressive bulls come in to buy the dip. Thus, the pressing issue going forward is gauging just how much conviction those buyers truly have.

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MARKET WRAP UP 11/16/10

Across the leading indices and sectors today, many a 20 day moving average fell early on in the session, as the S&P 500 finished down 1.62% to 1178. Breadth was strikingly bearish, and any intraday bounces were quickly met with heavy supply. While this development sparked a fair amount of hype amongst emotional traders, not to mention the financial news media getting in on the act of declaring the recent rally over, days like today are constructive for swing traders seeking to ride the prevailing trend.

With a rising 50 day moving average on the S&P chart, that general area looks to be the next key support level. After the recent leg higher from 1150 up to 1227, a sharp 4-6% correction should not come as a surprise. In fact, the argument can be made that it should be welcomed as a sound buying opportunity. It is also interesting to note how quickly the market is becoming oversold (e.g. the McClellan Oscillator), which is the hallmark of a mere shakeout within the context of a bull run.

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MARKET WRAP UP 11/15/10

Stocks were mostly in the green today before finishing flat, but the overall performance was far from inspiring. Several names normally associated with momentum (e.g., IMAX, VECO) that ended the day higher failed to achieve so much as their average daily volume, highlighting the lack of heart shown by the bulls in reacting to last week’s precise test of the rising 20 day moving average on the S&P 500. If nothing else, today proved to be an excellent opportunity to sit back, relax, and let the dust settle before Mr. Market decides in which direction he would like to proceed. Although it is true that only price pays, when buying names at alleged levels of support it is crucial to be cognizant of the volume on individual issues in order to gauge conviction. Otherwise, how can we best define our risk in surmising whether or not support will hold?

To be sure, the bulls still hold the advantage, with price above the rising 20 and 50 day moving averages on the S&P at 1197. With that said, this is no time for buyers to become complacent.

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NOTE: Much of the content of this post was originally published on Friday, November 12, 2010, at 9:20 a.m EST in 12631, a premium service for members of The PPT.

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I made the decision to hold my DDS position through earnings. Frankly, I went out of my way NOT to publicize it because, as I am sure you know by now, I am not the biggest fan of earning gambles. However, in this case I thought that I had enough factors in my favor to hold. For most rules, there are exceptions. In the case of holding a swing trade through earnings, I believe you should be able to articulate your reasons thoroughly and as objectively as possible. Indeed, inside 12631 we may even establish a separate chat room–a Tribunal, if you will–where members who want to hold stocks through earnings must present their case to the Tribunal before actually holding into the report.

In the case of DDS, here were my reasons:

• Extremely constructive price action and outperformance in the days leading up to earnings. (EXHIBIT A: See chart below)

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• A low float combined with high short position–potential for huge squeeze (EXHIBIT B: Check any source, and although numbers may vary, there is still a huge short position in this name with a relative low float, i.e. HUGE short squeeze potential).
• Overall strong momentum in the retail space over the past few months, especially after earnings (EXHIBIT C: See JCP JWN and majority of other retail names and how they have performed with broad market since Labor Day).

DDS is up roughly 10% in the pre-market on their earnings beat and subsequent short squeeze, and I will likely peel some of my position off into this strength today. Congrats to those of you holding.

As of 11/13/10, I have a 1/2 position left in DDS.

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MARKET WRAP UP 11/12/10

Today marked the final day that RaginCajun and I will post real-time trades here on iBankCoin. On a going forward basis, all of our holdings and trades will only be found inside 12631, our premium service in The PPT launching tomorrow morning.