Ya Down with IOC? Yeah, You Know Me

I bought a 3/4 position in $IOC, another one of the names from my VIP Setups last night.

All trades are time-stamped inside The PPT.

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TOTAL PORTFOLIO:

EQUITIES/ETF’s: 46%

• LONG: 46% ($ATPG $CTSH $DDS $HMIN $HRC $IOC $MSTR $WEN)

CASH: 54%

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The recent consolidation in the market has been argued as a sure sign of a topping process by many, or alternatively as merely a pause before the next leg higher. To be sure, the recent strength in the Dollar, as well as the vast array of inverted hammers and hanging man candlesticks printed, are colorable arguments for the top-callers to make. At the same time, the S&P 500 is still operating comfortably above the rising 20 day moving average, even after seeing some profit-taking over the past several days.

Perhaps what is most damaging to the bear case is the price action in the leading names. $AAPL, $AMZN, $FCX, and $GS are leading stocks who have digested their recent massive gains handsomely. Moreover, other stocks with sound bases are showing a propensity to follow-through with a breakout higher.

The bottom line is simple: The reason why I remain bullish is because I am erring on the side of the prevailing trend. However, I am keenly aware of the possibility that we may be seeing institutions starting to dump their shares to retail traders. Both of the bullish and bearish arguments have merit here, which is a good reason for the choppy, overall neutral action.

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I sold out of $SHLD, to avoid turning a winner into a loser. I also bought a 1/2 starter in $HRC, a name I featured in my last post.

All trades are timestamped inside The PPT.

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TOTAL PORTFOLIO:

EQUITIES/ETF’s: 40%

• LONG: 40% ($ATPG $CTSH $DDS $HMIN $HRC $MSTR $WEN)

CASH: 60%

Due to the bases formed on the following charts, they have earned the right to make their way to the top of my scans. No standing in long lines around the corner for these guys, as they are getting my VIP attention.

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[youtube:http://www.youtube.com/watch?v=R4cSLAP406o&feature=related 450 300]r
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MARKET WRAP UP 10/27/10

After a sharp morning sell-off, stocks began to base out by the end of the New York lunch hour before staging a late-day rally. With the S&P 500 closing down only 0.27% to 1182, one has to wonder whether today was yet another shakeout within the context of a powerful uptrend. On the one hand, the bears were able to take us down below the 1177-1178 support level which had held since last Thursday. However, the rising 20 day moving average, currently at 1168, was never in danger of being breached, and the bulls were able to close us back above the broken short-term support area. Thus, it is difficult to argue that the bears have made any substantial progress as far as recapturing even the very short-term initiative. The best that can be argued is that they have slowed down the momentum of the S&P, despite some impressive individual breakouts.

Another interesting aspect about today’s action was that the U.S. Dollar continued to show strength, as the updated daily chart of the Dollar Index illustrates below. However, the stronger Dollar did not necessarily give the bears the sustained jet fuel they have been looking for to push down equities. Although I am far from pounding the table about this idea, I am hesitant to automatically assume that a Dollar that finds a bottom here will mean a top is in for stocks.

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[youtube:http://www.youtube.com/watch?v=Nx64_N4AA04 450 300]r

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Today is a pretty good example of the danger in trying to nail a market top to the exact tick. if you had loaded up the little, yellow short bus when the S&P 500 hit 1171 earlier today, you would be sitting on a loser right now. Much worse than a mere intraday loss is the prospect that today was simply a healthy shakeout within the context of a strong uptrend, which will now resume.

Let’s take a look at my main broad market gauge, $FCX. To my eye. until Freeport breaks below that rising 20 day moving average, there is no reason to presume that the stock has topped out, despite a sharp run higher since the summer. Has it been a spectacular, almost incredible run since the summer lows of $56/share? Absolutely. However, if there is one lesson that you should have learned from 2008 and 2009, it is that the prevailing trend can persist much, much longer (whether it be up or down) than even what the “smart money” deems possible.

In other words, quit trying to be a Rico Suave and call the precise top. This uptrend is innocent until proven guilty beyond a reasonable doubt. We do not live under a French penal system, for Chrissakes.

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