What we are experiencing in the markets this year is extraordinary.  No amount of bad news can slow this market.  We’re about to make fresh highs.

Dump your weak and buy some STRENGTH.  Buy stocks that make people work harder (until at least noon) like DNKN.  You really don’t want to overthink a big move higher.  Simply find stocks you can define your risk in (using prior interesting levels or voodoo) and buy.  Then sit back and let the rising tide lift your boat.

There’s confidence in the banks.  That’s the cornerstone of capitalism.  It’s something we haven’t had for a few years.  Oh how well time can heal.

I highlighted the pump line this morning.  As I’ve done since the blogger network days, I put my money where my mouth (pen? keyboard?) is and took the bets.  Should we lose the pump line, many bets will come off and I will return to a more defensive position.

Actually even if we close strong I may dump some weak.  Why on earth are any of my stocks trading down?  Ridiculous!

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Seasonality is new to me, and like all new things in life, it brings out my childlike curiosity.  This same curiosity, mind you, killed the cat.  With that in mind, when I approach anything new that can impact my little purse (very homo) I like to get my hands dirty.  All covered in nasty data.  Okay this is getting weird.  I like it.

I pulled some very basic seasonality statistics from The PPT into excel to get a sense of normality.  Specifically, I analyzed the following:

Month To Date Returns – Average January Monthly Returns

The idea behind the above function was to get an idea of how far stocks have deviated from their average January returns to get a grasp of what is “normal” and what is not.

I define normal using histograms. Similar to the value areas I’ve been writing about in the mornings, I want to find where around 68% of the data falls. I consider any outliers as unique and perhaps warranting attention.

Using all PPT stocks that trade more than 500k shares on average, I built the following model:

You can see the model skewed to the high side, over the 0% line indicating an outperformance of January seasonality is happening in more stocks. Also you can see the range or value area where most performance deviations lie.

The top two tables tally the lower tail (below -1.5%) and bottom tables the upper tail (above 6%). I know, it’s backwards. You’re backwards. See below:

So what’s the play, the action? Well you can see biotech ranks high on both lists like a good lottery ticket. Fly told us this early this morning, so no insight gained there. Gold as an industry and a gaudy jewelry is failing big time in 2013, perhaps you game the mean-revision. Also note two oil industries making the underperformance list. Is our old nemesis the dollar to blame?

Turning our attention to the industries loaded with stocks outperforming the outperformers we see independent oil and gas. Just like the lottery action in biotech, the same is happening in this industry. HOWEVER, the difference is several fine folks in these halls know a thing or two about this industry. I must assure you I am not one of them. But if anyone (ehm, Fly) would like to suggest a top pick in this industry I’m all ears.

Solar made the list (obviously) and so did Business Services and Shipping. I don’t really have more to say. I’m just presenting the data to you. I would love to see some bravery and have some interpretation of the data in the comments below. Ga’head:

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We mostly talk stocks in this surreal environment and occasionally the halls are overrun by bullshit politics.  You’ll toss off to hours of politics instead of spending your time with your children or contributing to society.  And this is perfectly fine.  It’s simply another time-waster that will result in me finding the next innovation b3fore the distracted masses.

Some people enter these halls with the proper intentions of managing real money and watching others manage real money live.  I believe enterprising up and comers should work diligently to develop multiple residual income sources.  We have no pensions.  Some of our best are rotting in corporate mediocrity or studying their asses off for a higher earning slave shift.  But others have thrown up a big middle finger to monotony.  If you’ve taken this route and intend to stay on it you must build businesses.  Businesses, so when one goes stale another one flows ensuring your continued freedom.

As a trader, you can create several businesses.  Maybe you call them strategies.  Mostly we manually trade stocks.  Even when following systematic trades like trading a particular ETF based on PPT scores, we enter the trade manually and follow a set of rules to set (again manually) our profits and stop losses.  We analyze indices but mostly to gauge the context we’re trading in.

Perhaps you haven’t been reading the market profile work I’ve been doing daily and I couldn’t care less if you’ve decided it isn’t suited for you.

“But won’t The Fly cast your charred caucus in the dumpster come March?”

Yes, that’s the deal I’ve made with Le Fly and blogging is a business.  But I’m telling you as sure as 2013 is my busting out year, that thrusting my game onto the interwebs have sharpened it.  To me the biggest disgrace would be to sully these halls with lackluster advice.  We’re here to bank coin.  The profile work is putting coin in my purse.  And soon it’s going to be putting much more.

Enter Hybrid Trading:

My biggest problem with day trading is the idle time staring at the computer waiting for my high probability setup to emerge.  The best setups vanish so fucking fast and most days only have three or four dips from the well to grab a drink.  But what if you could assess context, key off of critical levels, then turn on a robot to diligently hunt out an entry with a high probability of reaching your first scale point?  This dramatically reduces the time eyes must be glued to a chart.  Once your context presents itself you simply turn on your robot and continue your business until a fresh trade is fed to you.  Then you manage the trade manually. Voila!  Hybrid trading.

And that’s exactly what I intend to build this year.  A new business.  If you’ve ever built such a mechanism and care to chime in sage bits of advice please comment.  I’ll always trade and talk stocks.  Swinging for yachts, if you will.

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After getting completely obliterated by “the wrong agent” over at $SAVE this morning (may your grave be cold and wet asshole) and tossed into a wretched holding pattern which set my day back, oh about seven fucking hours, I received a blessing from the stock gods.

Perhaps it was my morning rally sacrifice, hoping to find favor in the eyes of Zenu:

Sold $ATML #sacrifice to the rally gods

— Raul (@IndexModel) January 4, 2013

Perhaps it was chasers getting their chase on, perhaps it was buying high probability chart patterns with sexy seasonality patterns and #SHOMPOLOGY stats.  Really none of these things matter.  What does matter good people is the fat ass pile of coin I pursed today.

After putting my feet back on the ground, I did what all to often has led to losses—I started trading from the back of a taxi cab.  But fuck I had too.  The plan going into today was to get in front of my computer premarket, that got fucked!  Do I moan and cry or adapt?  Exactly, I made a sacrifice and started iPhone trading.

Every time I checked my phone $ZNGA was up.  I wanted to scale, but there it was flirting with its daily high, so I let it simmer while I slept on the foulest shit scented carpets in Detroit.  Then I flew the fuck to the only city worse than mine, Baltimore, turned my phone back on while we drove around on the runways, again Zynga is HIGHER and so are my banks.  Zillow was sitting still but looking mean.

Then I finally get to my destination around 3pm and find myself with a few moments to actually gather my thoughts.  Mind you $ZNGA has become a #TENBAGGER at this point.  I manage to scale a piece off three cents from the highs.  Then I buy Zillow and it rips into the close.  All.too.good.

Maybe I could lose sleep this weekend?  Negative, sleep not on the docket.  I may get poleaxed Monday by these gay short sellers getting cute with INSANELY OVERBOUGHT SHITTY BANK ticker $C, but fuck them.

All I know is the market isn’t this easy often.  When it is, you press your fucking positions and bleed these fucking turnips dry.  Use the 9ema, it’s our good friend.  Enjoy your weekend and assume I’m enjoying mine enough for the whole fuck lot of yous.

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Today’s trade was looking very constructive early morning, taking out the important resistance I highlighted this morning and building value higher after a progression of TPOs marching higher.  Early AM longs were working and solar was ripping dicks, which is a highly speculative sector.  The charts were setup something perfect and the fact I didn’t even turn them an eye in this administration is somewhat disturbing.

Let’s be frank with each other, this market is overheated.  The dick ripping shorts received yesterday was not medieval torture, it was a 100 degree samurai sword simultaneously de-cocking and cauterizing the wound with surgical precision.  We may have to check with @HalfBloodPope but I don’t even think antibiotics are necessary.  And come on, The Fed had to pump the breaks into the fast approaching weekend.

I think this market “wants higher” but I also think people who want in are sidelined and ready—charts all marked the fuck up.  Lunchtime buyers are the bag holders until proven otherwise, here’s where the inventory is priced.  Good day to you:

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Media will continue to report mundane news with a big surprise pitch.

Algorithmic trading will dominate the market more than last year.

The occasional glitches will be scolded, unless the market jerks higher.

Winter will be hard to shake in the Midwest and Northeast.

Cats will continue to dominate video and page view counts on the internet.

Tea will get way more popular.

Synthetic drugs (think bath salts) will make national news, again.

My 2013 stock of the year, Citi (shitty) bank, will perform an esoteric defiance of gravity:

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When a product or company has a curious name like Lululemon, a name unique to a query such as a Google search, we can gain insight by looking at Google Trends. Notice the steady increase in search volume for the name. I know it’s only one data point, but it’s a big one. Searching for a company through Google is often the first step to making a purchase. This steady rising chart is one any business would be proud to call their own:

More importantly, check out the fastest rising searches similar to a lululemon query. Chicago, where people are steady blowin’ money fast:

The search interest is much more steady than other female apparel trends, like Decker Outdoors’s Uggs:

I bought several family members Lululemon gear and they had no idea what the company was. Nowhere near saturation, and steadily gaining the public’s interest on Google. Those are two quality ingredients in the growth recipe.

Full Disclosure: I own shares of LULU and find their pants to enhance the female physique (read: booty).

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We’re getting our first solid snow and by the looks of it winter is off to a healthy start.  Last winter featured mild temperatures and practically no accumulation of snow.  Jeff Daniels and I can attest to the importance of snow and ice for our iconic lakes.  I mostly enjoy the ripe conditions for Tokyo drift driving.

The funny thing about the first significant snow is how everyone acts brand new.  Even the well studied librarians insisted it was imminent that the roads would become impossible to trek.  Oh the horror!  I performed my inaugural double-doughnut parking lot warm up before advancing to some chicane action near the obviously empty golf course.  You must always consider your risks when performing advanced driving maneuvers and perform every slide in a kickass manner–Ludacris on bump.

I’m almost giddy to shovel all the snow in the morning.  It’s the light and fluffy, good for making you feel boss strong and getting the blood flowing into your rosy cheeks (no butt).

Back to drifting, how do so many people resist the urge to slide their car around like they’re James Bond being chased through Stalingrad by a bunch commies?  Are people so caught up in the mundane that they completely overlook a practically free and amusing activity?  Then I thought perhaps they don’t have a method for learning the technique.  Then I thought about trading.

One thing you will notice about consistent traders is their methodical approach.  I look back at the worse trades of my year and they were all deviations from my plan.  I tend to throw money at an idea quick, trial-by-fire.  Take for example my entry today shorting Macy’s.

One overarching thesis going into the New Year is weakness in high-ish end retail stores.  Today the early holiday sales data comes out and we get a bid sell the news reaction.  I practically sold the lows on M.  I’ve already deviated from my method of trading.  My method is simple, it’s momentum and order flow boiled down to two simple steps:

Define the trend (or lack of)

Trade pullbacks in the direction of the trend

I love this method because it has a margin for error.  I also know much sooner if I’m wrong.  Fortunately I started very small in my M short.  But even that is a deviation.  Nowhere in my plan does it say, “Toss a feeler on and add when the sauce starts to thicken” or whatever.  It says trade the pullbacks.  Now I may have to ride peak-to-trough before I can even assess the downward momentum.

I acted brand new.  And we should all learn from it.  2013 is about trading the PLAN only.  As for drift driving, you can call me Steve McQueen.

http://youtu.be/5cPN6EsE6cc

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You better be good, Santa Ben is coming to town.  Everybody have an excellent holiday.  Remember, the holidays are all about forgiveness.  Don’t forget to forgive yourself too.

http://youtu.be/2e5TYdNqJ8M

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My second major theme for 2013 is that department stores all face serious headwinds, and are the most vulnerable industry.  Here’s a link to my first theme going into 2013.  Anyone who loves the stock market and has been dragged out shopping during the holiday season should love this piece.

First off, I never shop in department stores unless I’ve been dragged there by my girl.  What that means is when I’m there she’s shopping, I’m a pack mule for carrying cargo.  Mentally I’m completely removed from the shopping experience, instead diverting my mental capacity to investigation.  I look at the racks, what people are shopping for, ask for a manager and see how long it takes, and talking to employees about their sales goals.  This is old school channel checks, it’s incredibly subjective, and perhaps only a defense mechanism for my otherwise disdain for being dragged around town.  BUT, this year, I’m telling you as objective as I possibly can, volumes are down.

CASE IN POINT: Sephora.  This is one store where I can get concrete information.  Their store at The Somerset Collection, our best shopping center, and a top 10 grossing store nationally for the company, is missing their sales targets by nearly 10%.  They’re also over on their labor budget.  I consider the products they carry especially sensitive.  Ladies from the upper-middle class need makeup because, as Chuck Bennet so eloquently stated, without it they’ll “get no handbags.”  Women don’t bend the budget knee and give up their beauty products without a fight.  It’s the first in three years they haven’t blown their sales forecasts out.  Red flag.

The second force, the big chipper, the internet.  Yes of course I know department stores have a huge online presence, but they also have huge physical shops–full of expensive sales reps, nice warm air, shined floors, and well you get the picture–overhead.  Smart phones are more prevalent than last year and shopping on the go (read: at work) easier.  Out on the internet the competition is leaner, have better developers, and way more budget flexibility to advertise.  Department stores a losing online.

Finally, we’re going over the fiscal cliff. Whatever, WHATEVER the fuck that means.  Rest assured either by simply being more cognizant of the risk or the high likelihood of it’s occurrence, the upper-class expect higher taxes.  And they’re bitter in general.  They watch way too much news.  Cliff imagery.  Domestic Terrorists.  Doom’s day preppers.  NRA.  Careless citizens snapping pics of people moments before death by train.  Increased hurricane damage.  It’s all enough to BUY A GUN, at the least.  Suddenly, blowing money on RL over at M seems less important.  Why not go on EBAY and get a ten pack of polo shirts from Izod or APP?

With all this in mind, I took to the almighty PPT.  I was happy to receive thesis support instantly, Department Stores are the lowest ranked industry in the service sector.  Their January seasonality is 50/50 with an abysmal average return less than 1%.  Things perk up slightly in February, and March is downright bullish, seasonality speaking.  Here’s a very brief fundamental comparison:

According to these few fundamental comparisons, Sears obviously is getting their ass kicked.  Shorting shares of SHLD has been a well publicized trade, it has been a loser .  The stocks up nearly 30% this year.  Shorts could get their redemption this year.  But I see more vulnerability in the slightly higher end (but not too nice, remember upper-middle class).  Which makes me not want to short KSS, except investors may be ready to dump the shares after watching their modest annual gains gap into the red earlier this month, POOF!  JCP already crushed their shareholders this year, down big.  It’s more vulnerable to a squeeze higher on its inevitable march to zero.

Mostly I’m interested in Macy’s (M)  and Saks (SKS).  I suppose a head-to-head comparison is in order.  After all, either of these stocks aligns well with my overarching thesis.    For now I’ll leave you with my short-term chart annotations for all the highlighted stocks:

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