A Mechanical View of the Market

I do not believe in system trading or technical based trading. I have a strong belief that human instincts are an invaluable tool, when making quick decisions. However, I also believe that in order to get good ideas, one must have great contacts and/or a mechanical system that will present ideas.

Hence, I created The PPT.

My opinion of the market is to fade the rally. For the love of celestial bodies, states are running out of money and corporations are giving people the ax, on a daily basis. While it’s true, the market usually rallies, 6 months prior to an uptick in the economy; I want to float the idea out there that “this time is different.”

Nonetheless, since the current trend is up, I ran some interesting screens worth perusing.

PPT Overall Scores: (3162 total)

Average Technical Score: 2.164 Sell
Average Fundamental Score: 3.596 Buy
Average Hybrid Score: 2.771 Sell

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NOTE: All of the “Top Ranked” Screens below define Hybrid Scores, which is a combination of technical and fundamental factors.

Top Ranked Mega-Caps (50 billion or more)

1 DCM 4.44 82022360000
2 MCD 4.26 66371148080
3 NTT 4.07 65711916666
4 FTE 3.76 68559655227
5 WMT 3.71 213929635436
6 VZ 3.64 94275673618
7 AZN 3.64 55637150000
8 NVS 3.59 107763900000
9 JNJ 3.53 159038243893
10 IBM 3.49 108376755731

Top Ranked Large-Caps (10-50 billion)

1 CBY 3.79 11155407266
2 PSA 3.77 11351456541
3 LOW 3.76 31240493415
4 WAG 3.76 23764530558
5 SO 3.67 28217962551
6 AFL 3.65 20322979106
7 APOL3.65 11944629620
8 LLY 3.64 39759258055
9 PKX 3.64 17020718089
10 BR 3.63 34546790733

Top Ranked Mid-Caps (5-10 billion)

1 NLY 3.8 7658835099
2 VFC 3.77 5767962278
3 GPS 3.72 9155944486
4 FFH 3.7 5084037219
5 PH 3.7 5999716175
6 PBCT3.68 6479118839
7 CEPH3.66 5131366857
8 FRX 3.65 7130657709
9 SHW 3.65 6686811503
10 TSP 3.65 6572655364

Top Ranked Small Caps (1-5 billion)

1 ORH 4.52 2685682419
2 BJ 4.23 2176082243
3 DLTR 4.17 3661358701
4 SF 4.08 1054817148
5 COGT4.05 1149060894
6 ORLY4 3571518717
7 THOR4 1438842982
8 AHL 3.86 1543918429
9 WMS 3.86 1308245223
10 GVA 3.85 1685826408

Top Ranked Micro-Caps (under 1 billion)

1 OCN 4.54 498596414
2 ACET4.44 223954709
3 SHEN4.44 584037576
4 APSG4.34 192485248
5 SUR 4.3 631962470
6 JOSB 4.26 390782133
7 INT 4.18 877740000
8 EPIQ 4.15 575120980
9 MNRO4.15 399705564
10 ALK 4.1 896532785

Potential Short Squeezes (stocks ranked “buy” or higher, with large short positions)

1 BKE 3.86 63.2
2 JOSB 4.26 38
3 AMED3.08 36.7
4 VLCM3.54 36.1
5 CMG 3.52 33.8
6 SUP 3.58 33.2
7 INWK3.04 32.6
8 ETH 3.08 32.1
9 PNRA3.71 31.9
10 RATE3.54 31.8

Stocks with the Biggest Hybrid Change Last Week (ranked a buy or higher)

1 BJ 87.17 4.23
2 NZ 81.46 3.72
3 PHHM77.01 3.08
4 PMTC66.48 3.03
5 SAFM65 3.3
6 FNF59.13 3.66
7 HBHC57.69 3.28
8 SDXC56.86 3.2
9 JAS 56.04 3.23
10 ASF 54.68 3.14

That should keep you pea-brained pigeon fuckers busy for a few hours.

“The Fly” started off his day waking up to the music of the Gods. He jumped out of bed and dove head first into his shower.

Following his rinse, he went for breakfast, which consisted of 5 pancakes, 2 eggs, bacon, hash browns and three cups of hot hot coffee. Immediately following his morning snack, he went to his office to watch the employment data results on CNBC.

Much to his delight, almost everyone lost their job in November! The futures tanked and his positions increased greatly in value.

Dressed in an all white robe, leather sandals, holding a blue can of Monster Energy Soda, he sat down at his desk and blogged like the wind. He told stories of tragedy, while chuckling, but by no means was he ever laughing. He threatened complete strangers, exclaiming with fury: “fuck a ham sandwich goat lover. I will punch your mustache off.” His day was off to a glorious start, indeed.

He even made it onto Twitter, in order to inform the 600+ idiots “following” him that their money would be his, very, very shortly. By no means was he kidding.

All was going according to plan, his plan, until noon.

As noon approached, his short positions, in banks and Chinese things, started to work against him. Earlier that morning, he sort of hedged a little, buying some stocks; but he quickly sold them—betting the market would, as it always does, “shit the shower.”

Time passed on and soon enough his trader/servant began to annoy him, making noises at his desk, drinking soda pop or snorting cocaine. Quickly, “The Fly” threw an orange at him and yelled “fuck you asshole.”

In a rage, he went to the internets, where he made some more idle threats to complete strangers. Much to his chagrin, he kept getting interrupted by pesky business acquaintances, via telephone calls, wanting to know what the market might do in the final hours of trade.

“The Fly” was annoyed by these questions, as his positions started to work against him. Luckily, he had a few hedges, from a few days prior. But it was becoming obvious, as well as evident, Mother Market had it in for him, on this day, Friday, December the 5th, 2008.

The comments on his blog quickly became deranged and idiotic, authored by anonymous goat lovers and/or fish face fuckers.

His heart began to race. His palms became sweaty. For fucks sake, he saw the market reversing right in front of his face, starting with banks/Chinese things, then eventually infecting his oil shorts.

By 2pm, “The Fly” was in full fledged retreat.

From 2pm to 3pm, wild and disturbing things occurred at “The Fly’s” office. These events were so heinous, so egregious, they cannot be repeated to anyone, without penalty of death and/or torture. Just know this, as the losses started to pile up, his mood changed from joyously jubilant to demonically dangerous.

By 3pm, it was clear to “The Fly” that his position was an outrageous losing one, not so much different than how Napoleon must have felt at Waterloo, or for that matter, any Southern army watching their homes being torched by Union patriots, back in the good old Civil War days.

He threw a ham sandwich at his trader servant and said “sell those fucking bastards now!!!”

The bellicose nature of his voice made the office plants die and the mirrors shatter. Quickly, the trader/servant started to book losses, and restructured to eliminate risk.

The market was about to close when the lights went out. “The Fly’s” office was as dark and cold as the sunless side of the moon. Suddenly, the marble paperweights on his desk began to tremble, amidst thunderous noise just outside of his office. Afraid like a little bitch, “The Fly’s” trader/servant ran for cover, hiding behind a filthy, disgusting trash can.

“The Fly” stood up, sword in hand, lightening in his eyes and yelled: “who goes there”? Without pause, he darted for the door, opened it up, ready for confrontation. Within seconds, a hideous gray haired woman, at least 9 feet tall, wearing a black robe, approached “The Fly” and said: “Guess who, fuck face”?

Shocked and amazed at the sight of this monstrous creature, “The Fly” became stunned, in a very “deer in headlight” sort of way. Things began to move in slow motion, as he saw this woman pull something from her robe. It was shiny and gold, and it fit around her bony knuckles.

For the love of little babies and currency, they were brass knuckles!

The next thing he saw was her clenched, brass knuckled, fist touch the ceiling, just prior to it quickly making its way for his nose.

Bloodied and semi-conscious, the last thing he heard was some bitch of a whore on CNBC celebrate the markets glorious green close, as Mother Market left “The Fly’s” office— drinking one of his Monster Energy Soda’s, she said: “See you monday, asshole (burpp).”

A ridiculous day for me. I covered numerous shorts today, with the intent to put them back on, early next week. Thank heavens I was long FAS, BGU and other longs, else the blood would have been extra bloody.

Much to my chagrin, I will lament all weekend about missed opportunities. Bear market rallies are incredibly fierce and make you regret the day you were born, when short into them. However, they never last and the reversal is usually equally fierce.

Bottom line: I got caught short, like an idiot, and now find myself eating a big slice of humble pie.

Egregious zombies will bite through your cranium and suck out your gray matter, if you stay long this market into 2009. While it’s true, it is very encouraging to see the market rally today, in the face of abysmal news. However, we’ve seen this story before, haven’t we?

How does it end?

I’ll tell you. It ends with “The Fly” running you over, in his time machine, fitted with spiked wheels. That’s how!

Back to the real world:

California is just about insolvent, yet you find a reason to buy stocks. I know, I know, the fucking lines on your charts are aligned perfectly with the solar patterns in the sky. The rally shall commence, until the last bear is tossed into the high pressure cooker. I know.

But, there will be an “exogenous” event, sometime soon, that will shake you to your core. You will just sit there, dumbfounded, thinking “why didn’t I listen to Senor Tropicana”?

Oil is fucked in a very severe way. With that said, I like the reversals in NOV/RIG today. However, down below $60, oil stocks need to be sold on all rallies. Their numbers will be to die for, literally.

Look, this market is gayer than a three legged sculpture of Liberace. Use this rally to sell, else feel the spikes of my wheels.

I sold 5,000 JPM @ $32.40.

NOTE: I still have 5,000 left.

UPDATE: I sold another 3,000 @ $32.45.

NOTE II: I will keep the additional 2,000 until Monday.

Today was supposed to be a pivotal day for the markets. This is the day when the real direction was supposed to be decided upon, by overweight men who happen to be high on coke. Instead, we are riddled with false breakdowns and strong banks.

WTF?

One thing I know: never short a dull market. And this fuckers is one hell of a snoozer.

Recent Dow strength can be greatly attributed to the rebounds in XOM, CVX and WMT. However, one must think to oneself: “will XOM and CVX continue to rally or fade”?

On the other hand, there has been nice strength in JPM, C, MRK and KFT, pretty much all day.

My guess is as good as yours, at this point. My bias is to be short, but I am cognizant enough to have some upside hedges in JPM, PFE, FAS, BGU and BDK, just to name a few.

Frankly, the play book says we close at the lows for the session. However, I know how bear market rallies can just pick away at bears; and it can last awhile. As always, the true tone of the market will be revealed at 3:15.

Either JPM leads us up. Or XOM leads us down.

Place your bets.

Looking at some of my Godly indicators, I can tell you with a certain amount of certainty, barring martians landing on the NYSE and buying up all of our companies on the cheap this afternoon, we should close down between 2-5%.

The blood in the Dow and top Nasdaq stocks are too much to overcome, especially on a grim Friday afternoon.

You can fuck around all you want, playing with oil, banks and tech; but at the end of the day, this fucker eats pavement.

On the other hand, the stubbornness of the banks/Chinese cocksuckers is quite impressive. As a result, I’ve been buying small quantities of JPM, willing to lose money on the trade, just to hedge the upside on my insane FAZ position.

Remind me to never buy/sell 300% etf’s again.

Speaking of which, I’ve been buying ERY, which is also a lunatic etf. I must admit, all of this leverage rattles my cage a bit. As sure as I’m sitting here, in my non-staples chair, truckloads of unwashed peasants are throwing away the inheritance in this instruments of hell.

Where’s the SEC? I mean, the reason why we are in this position is due to excessive leverage, no?

The answer: let uneducated idiots try it too!

Unfuckingbelievable.

The breakdown in oil/gas is pervasive. It is infected the psyche of our dear friends in the middle east and Venezuela. Expect massive bankruptcies in the space, inside of 12 months. Many of this ham and eggers mismanaged at the top. As a result, Russia will be forced to devalue its currency, within 3 months.

Write it down.

Once again, money is flooding into treasuries. Is it a coincidence that ever since Paulson doled out billions to the banks there has been a parabolic move up in treasuries? Do you think some of our banking executives are stashing the money in t-bills, instead of lending it out?

Get the fuck…

One sector with marginal strength are the mortgage players: NLY, CMO, ANH and RWT. The theory: with mortgage rates coming down, people will start to refinance again. Who knows?

If you think we will rally off a -533,000 employment number, you’re out of your God damned mind. In the event that we do rally, defying all laws of logic and reason, dating back to the ancient Greek days, “The Fly” will be sure to cordially sell into it, mind you, with the utmost amounts of energy and conviction—as if he were punching holes through office grade sheet rock (out of sequence, makes no sense, I know).

Here’s the cold hard facts:

America will be embedded in a deep recession, until late 2010.

There is NO FUCKING WAY the market will be up in 2009, in light of what just occurred.

The shocking decline in oil happened too fast. As a result, many states will “enjoy” budget short falls.

Although it would be nice to see the U.S. savings rate climb, in the process, it will be incredibly debilitating to the economy. Think for a moment: how many stores did The Gap open up, based upon a loose credit environment?

Look, I am not saying we will fall off a cliff, like Wild E. Cayote. Just don’t get overly optimistic about a quick turn in the markets.

With my money, I hedged my FAZ position with small buys in JPM, down a buck. And, I’ve been buying ample amounts of ERY/DUG, due to the fact that oil is fucked on a spindle. And, I sold out of all of my TNA, for a loss. And, I blew out of my GME, for a gain.

Basically, I think SKF/FAZ go much higher. However, in the event men with tight orange leotards try to “bottom pick,” owning God’s bank (JPM) is not a terrible idea.

NOTE: It appears my GVA short may finally start performing.

What a coincidence.

In 2008, as the stock market cratered and the housing market collapsed, more young members of the Army, Air Force and Navy decided to re-up. While several factors might explain the rise in re-enlistments, including a decline in violence in Iraq, Pentagon officials acknowledge that bad news for the economy is usually good news for the military.

In fact, the Pentagon just completed its strongest recruiting year in four years.

Now we can get ready for the big one.

UPDATE: iBC’s own, Woodshedder, is revealed here. And, he was interviewed by The Wall Street Transcript here. Two things: Wood is not nearly as ugly as I envisioned him to be. And, secondly, he is becoming a media whore. What’s next, CNBC?

[youtube:http://www.youtube.com/watch?v=bxLk3uf2msk 450 300]