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Be There When Biotech Implodes

I am in a pickle here. My bias model was atrociously wrong about this entire October rally. The bias has been short since October 4th and it is short again heading into this week. This week is a new month, a month that, mind you, is historically bullish.

So new month, bullish month, and a model on a losing streak and now I have to decide whether to work within the confines of another short bias.

Fortunately my bias has a few circuit breakers. Last week the circuit breaker was a bullish third reaction up after the FOMC rate decision. Other circuit breakers include pressing beyond the ATR band and trend days against my bias. These help keep me in the game even when I am wrong.

This week has no major economic event until Friday morning when we hear Nonfarm payroll.

More concerning is biotech which is already down two days off my price level. I did not initiate my short at this level because it was not a conviction level and I was running around like a madman performing various rituals for the Halloween festivities.

So now I have to decide whether to chase the weakness in biotech, which is real risky because I have no reference to whether I am wrong until about ten dollars higher on the IBB.

Yet I know the comeuppance is coming—an event so gruesome, so all encompassing, that it carries a grandiose reward for the speed demons who latch onto the price wagon before it heads off the cliff.

A new month means the higher time frame is more likely to participate so this first week could offer decent opportunity to make some November money before we stall into more boring grind. I will be working the short side more aggressively than the long until further notice.

Finally—for two weeks I was working rose colored sunglasses (my short bias) with a conflicting Exodus Hybrid Oversold cycle. That was a conundrum which kept my Switchboard more-or-less neutral and kept me skittish. THIS IS NO LONGER THE CASE. The cycle was completed on close of business Wednesday. Exodus threw down some big numbers on this last cycle:

Hybrid-OS-10142015-FINAL

Exodus members, the latest Strategy Session is out.  Check it out, especially Section IV.

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Time To Get Turked Up

The markets are starting to crawl and I must begin making preparations for tomorrow’s festivities. The turkey gods have been selective in their benevolence, but have bestowed us with market gains nonetheless.

We seem to have timed our Apple entry well, yes?  It is always nice when you do not have to wait for trades to materialize.  But the best moves often take time.  Take the LED industry.  I made a killing in these names this year, yet here I am, large into this dip, sitting on my hands.

Sometimes I cue CREE and RVLT onto my 3-minute charts and watch them, why?  They are stuck in mud for the time being.  There will be brighter days for the space.  Every flat day it becomes more a question of when and not if.

Tesla caught a bid today and started moving, and it quickly perked the attention of the astute trader set.  It will be interesting to see if the lack of seller follow through can result in some buy flow.

I do not have much else to report on.  I am all in, 100% long, and there are other names I want.  I may make some lateral moves on Friday.

Have a wonderful holiday.  I am grateful to trade and discuss trading with my internet people.  You are the finest people I have never met.

Here is another reason to be grateful.  BEHOLD A GODESS, Khatia Buniatishvili:

http://youtu.be/Sp2eRmsCxkI

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1 for 6

June, Q2, and all of its awesomeness are in the books.  Now we must press into everyone’s favorite quarter, the third, infamous for blowing up accounts.

We had a little scare there for a minute, with bonds going tits up, but so far these fears have been swept under the rug with all the other market villains.  Will the V-shaped bounce stick in PCK?  It seems unlikely.  Volume has tapered off on the bounce up, making the move appear to be of the dead cat varietal.

So I don’t think we’re out of the woods, whistling and skipping across the prairie…blue skies and Teletubbies, yet.  If you are carrying yourself in such manner, have a plan.  Otherwise a surprise cyclone could drop a garbage truck on your person, like the finger of God removing your sperm from the gene pool, benefitting humanity as a whole.

I say all this to you while I stand atop 80 percent long equities, most of which are consumer discretionary.  Why would I carry such funk stocks in this uncertain climate?  It’s simple really, like always.  The wealthy, like always, they’re confident.  They’re always confident, but lately their confidence is at all-time highs, as measured by the Consumer Sentiment Index.  One of the best ways to improve the overall quality of your life is to upgrade your bed.  Don’t sleep on some piker mattress from a garage sale, covered in sweat stains and bed bugs—filth, I spit on your bed.  Most people (not most iBC loyalists) spend close to 40% of their lives in bed, why be ghetto about it?  The answer is they aren’t, they’re buying TPX mattresses by the factory load.  Good lord these babies have a sweet margin, too.

iBC Loyalists:

pilot

Also, there’s a big consumer push into adjustable beds.  They promise ergonomics, improved circulation, and an ace reading position.  Traditionally only the elderly and hospitalized enjoyed such decadence. Now they come with 52-inch retractable plasma screens at your feet.  UUUuughghgu!  Guess whose mattresses work best in such conditions?  Yep, TPX.

Now I won’t chop my dick off if TPX isn’t trading to $50 in July, but I have a ton of conviction in the name.  I crushed this trade late last year based on the same conviction.  Are you going to tell me I’m wrong?

I have 11 other longs aka peak position count.  I present them to you, largest-to-smallest, headed into July:

AAPL (lol), TPX, F, FB, ANGI, YGE, IMMR, Z, CREE, GS, AIXG, ENPH

May Julius Caesar and his month bring gifts to my person and yours.

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Cliché April Foolery

Perhaps it’s the crystal crack meth I’m holding in my portfolio, and the fact that each of them is a loser, but what looks like minor damage on the S&P has my portfolio down 1.5 percent today.  If I was heavy long, sure, that makes sense, but with cash over 50 percent it comes as a bit of a surprise.  It’s like oh hello April, I see you’re coming in like a lion.

So I’ve been forced to take two losses today; first I cut Yelp, and this afternoon Ford.  Here’s the gist, at this juncture, I’m not loosening risk and letting setups work.  Ford very well could turn around this week, but the daily chart is sloppy, and not something I’m lending patience to right now.

Yelp plum fell on its face, as did most of the social media space. To hold even a trace would be a disgrace. I want only the ace. I want the ace.

My holdings now are (by size) CMG, ANGI, AIG, ZNGA, CREE, and old pokey aka AWK.

We could talk about each and what they’re doing, but you have charts yes?  You see much of what I do, no?

Here’s my bottom line: there’s lots of POMO on tap this month.  It’s a strange environment.  As we wind down into the close, we’re getting a b-shaped profile, suggesting long liquation and not much more.  The sellers made progress on many individual charts, but they haven’t taken the big board yet.  Moreover they haven’t controlled the big board all year.  However, this is a new quarter, a page turn if you will.  Therefore we all need to stay vigilant.  Like, why the hell is the Yen so strong today?  Just be cognizant of the environment.  I’m a bit unsure, hence my huge cash.

Be well.

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So…Back To Gold Buggery?

After hearing the news that Cyprus depositors of the six figure variety are each getting a leg chopped off and tossed into the pig trough, and puking a little bit, my immediate thought was ‘people will run to their gold and guns on this news.’

Rather than blast the interweb waves with subjectivity on this peaceful Sunday morning, I thought instead we could revisit my piece on February performance in the metal and miner space, look at how they’ve performed since then (during March) and later this evening I’ll chomp some charts.

Exhibit the first, via my February blog, courtesy of stockcharts.com:

miners_febperf

Exhibit two, performance since:

miners_marchperf_intofinalweek

The March-to-date performance would suggest money flows are finding their way into the miners at a rate greater than would be counteracted by sell flow.

Are leprechauns invading the market, chasing rainbows in a completely non homo fashion?

Has Jakegint received a massive bonus from his feverous work last year, and cemented the market with a heavy bid?

Will you need three guns or more to protect your metal stash and family from the zombie banker apocalypse?

Tune in this evening.

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Bad Seasonality Gambler: HERE’S HOW I MAKE IT UP TO YOU

I went back to the seasonality analysis I performed at the beginning of February to reexamine how wrong of a conclusion I was able to draw from it.  I knew it was going to be ugly because my top pick from the data dig was ANR.  Have a look at ANR’s February performance:

ANR_FEBseasonality

I actually lost some money on that play, taking my third and final attempt at buying ANR as it tried to negate the head and shoulders pattern.  I sold around February 8th aka the trough before their earnings announcement spike, then subsequent melt lower.

The wrongness of my analysis extended further when I predicted it would be a “very shiny February” because my seasonality interpretation supported the idea that miners would be strong in February.  BIG TIME WRONG, check out how awesomely wrong I was on this call:

miners_Febperformance

Fortunately, I never committed any money to this call, I simply observed the play.  Every single chart in the space looked weak which made it easy to avoid.  ANR at least had a semblance of hope setting up in the price.  If you have a dog’s brain worth of technical analysis understanding and aren’t a long term investor, you would have stayed out of the miners this month.  You downright love losing money if you parked your stupid money in EXK for the month.  F-

Please accept my apologies if my seasonality data put a bug in your ear that was whispering false promises about the miners.  If you read along you would have stayed clear, but I understand how people can make rash financial decisions based on other people’s internet decisions.  Don’t do it.

With all of that in mind and because my access to The PPT has been revoked, there will be no March seasonality data dig.  This is likely better for everyone.  I don’t like to waste my time or yours by not adding value to your trading day.

I can’t tell you what will happen tomorrow, and I most certainly can’t predict what will happen over the course of a month.  I work in probabilities.  My probabilities are most reliable in the intraday to 3-12 day swing environment.

I posted all my thoughts on the #socials and their charts if you want some value added.  If you’re over 47.5 and don’t see that the word #socials is a hyperlink, let me be the first to tell you that if you click it you will be taken to a spectacle of charts.  Get excited you fossil.

Finally, I am not a huge fan of knife catching, but the rubber band is stretched out more than my nephew’s tee shirt after a trampoline wrestling match on a few of the miner charts.  I may dabble in the circus arts this week.  Similar setup on both of the following charts (click the charts to HUGE size them)

EXK_MAR2013 RGLD_Mar2013

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You Can’t Spell Economy without ECO

My portfolio is transforming into a tree hugger’s paradise.  Consequently, I am turning into a tree hugger.  As such, I will turn a blind eye to the black smoke rising from the CREE plant in China and only declare them to be beacons of hope in the corporate quest to save our planet.  I also hate coal especially much now.  Coal makes peoples lungs hurts and trees are like the earth’s lungs.  Therefore coal hurts the earth’s lungs.

Coal also hurt my book three times this year.  Those ne’er do wells at ANR, dastardly folk, refusing to adhere to their seasonality in a timely manner took a decent bite out of my portfolio.  Thus they are evil and hate Al Gore.  How could someone hate the inventor of the internet?

Some of my eco-friendly holdings, because I’m an eco-friendly kind of guy:

CREE, OESX, FSLR, CCJ, and FB

“Facebook!?” you may ask, yes.  They’re led by Mark, the patron saint of eco-consciousness.  He’s decided it would be best to build hundreds of thousands of server racks in Iceland, creating a landscape much like The Matrix, because he can use the cool outdoor air to chill his computer brain.  Never mind you the heat exhaust, we need to take our eco-minded approach only to the extent in which it benefits the businesses we trade.  May many others follow suit and carpet the polar lands with servers.

There are other names to consider.  All kinds of solar names are ripping diapers off the shorts today, exposing their soiled, naked bums.  Other heroes, like Elon Musk and his noble electric TSLA rides should be added to your book.  Vile shorts, when will you learn to love the planet?

I’m off for now to gather roadside trash to burn in my new incinerator furnace.  Raul3’s going green.

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Always Overreacting to Snow

Happy Chinese New Year ladies and gents, it has been a lovely weekend in Pure Michigan.  I’m certain Tim Allen would approve.  I hope you’re receiving me well in the Northeast, under thick blankets of snow.  That first day of sunshine after getting pummeled with snow, beautiful!  If you’re without energy, huddled over a barrel of burning trash, perhaps eating beans, and still receiving this message I’m impressed.  May I suggest procuring a generator from GNRC with your modest corporate bonus?

I don’t care to dig too far, but I’m fairly certain people from the Northeast hype up snow storms more than anyone in the world.  A news flash hit me Saturday while I passed a hotel television.  Apparently they’re naming winter storms now.  I haven’t watched a full news show in several years, and certainly don’t tune in to the weather channel.  I’m impressed many find the time to observe such television for hours, my how I’ve digressed.

It may be with good reason Nor’easters and Alberta Clippers strike terror into the hearts of these northern folk.  Your energy infrastructure is always getting beat to rags, likely because God hates your Facebook lifestyle.  If you intend to continue your immoral internet existance, you better take proactive and preventative measures to ensure your robot overlords remain powered up.

Obviously we need to benefit via stock market picks when people and governments step up their game to deal with the new era of volatile weather.  We discuss this play often, and I’m going to go back through the archives and find ways others have played or intend to play this weather phenomenon.

Note:  The crazy weather is really rather normal.  But we don’t care about that.  We want everyone to think it’s crazy and with the help of their administration find ways to overreact and buy stuff.  That way we can make money buying companies who stand to benefit the most.

Before I dig my way through the dim lit archives of iBC, let me toss my top two names in the hat:

CREE and GNCR

Anyone else who has a favorite play please chime in below.  Adieu

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The February Seasonality Distribution

Seasonality data is still new to me, but given the volume of the data available it’s interesting to analyze the distribution to understand what is normal.  If we can define February performance that is normal we can hone in on stocks and industries whose behavior isn’t normal in the wonderful quest to extract money from our markets.

When you put all of the average monthly returns available in The PPT seasonality into a frequency histogram you see a normal distribution which forms the familiar bell-shaped curve.  Most readers of this site made their way through the school system by being massaged into the lower 1/3 of the bell curve.  Good for you.  I know a few of us were up in the 99th percentile, let us continue.

Once I have the data set I can make some observations which can direct my eye to potential opportunities.  My first observation is the slight upward bias of the distribution.  The highest frequency occurs above the zero line.  This could be attributed to the upward bias of the market during the month of February.  Next I use my eyes to single out where roughly 70% if the data is, much like the value area on a daily volume profile auction.  I’ve noted the range of normal February returns in orange on the following chart:

Much like the value areas from my profile charts, the opportunity lies at the edges of value.  This is where we can focus our attention and do business.  The extremes of the tails are interesting, but they could be erratic, event-driven performance.  If an industry’s stocks moderately outperform a massive dataset, there is a proclivity for repeat performance.

Thus I filtered the data down to stocks that reside in the fat tail of the upper distribution, with performance in the range of six-to-ten percent.  The data returns 187 (buck, buck, buck) stocks.  Finally I see which industry has the most stocks from this sample.  The winner is Industrial Metals & Minerals then gold:

Given Fly’s take on the data and mine [sic] I would say it’s going to be a shiny February.  It’s nice to see Senator Gint rejoining the ranks today.  You should read his post today and run through his entire archive and consider yourself lucky to have that knowledge free at your disposal.

http://youtu.be/oxpcZrQQM-4

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Digging into January Seasonality

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.

This is not normal

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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