Casino Time!

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If you have been following me since my Peanut Gallery days, then you know that “The Wine” has been fortunate enough to be enjoying a fine trading year. When the market was healthy earlier this year, I was riding the trend up. When things got toppy in late April, I got into 100% cash the week before the flash crash, and have been playing it safe ever since.

I am in a position now where I am going to gamboool a bit here. Thus, I went long a full position in $JMBA as a speculative play. Obviously, this carries a high degree of risk, so please use caution. The charts below detail my reasoning and analysis.

NOTE: More profit taking, as I sold out of my final 1/4 in $NR and sold another 1/4 in $SWSI.

All trades timestamped inside The PPT.

UPDATE: I sold out of the rest of my $SWSI stake, and sold 1/2 of $NTAP to lock in profits.
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TOTAL PORTFOLIO:

EQUITIES: 34%

• LONG: 34% ($ARUN $BX $NTAP $SAPE $POWR $JMBA)

CASH: 66%

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One of the interesting aspects about the broad market correction since April is how many veteran technicians have extrapolated on the gloom and doom that awaits our future, without so much as acknowledging some glaring bullish divergences. Now, I recognize that I am just some punk blogger, whereas Richard Russell and Art Cashin write their daily limericks to much fanfare and praise.

However, riddle me this, elderly sirs–Why have the transportation stocks failed to come even remotely close to breaching their February lows (as opposed to the S&P and countless other indices/sectors/stocks)? Moreover, why, good sirs, have the trannies now broken out of their multi month falling channel if the world is, indeed, ending within a year?

To be sure, there is a lot of work to be done in terms of backing and filling, even if the next move is much higher from here. However, the trannies are historically leading indicators, and to hear technicians/theorists like Prechter and Russell ramble on about an epic move lower is just not evident in the charts yet.

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I made the following trades, thus far today (ALL trades are timestamped inside The PPT):

• Up a quick 10%, I sold 1/2 of $ARUN.
• I added 1/4 to $BX and now have a 3/4 position.
• I initiated a 1/2 position in $POWR (see chart below).

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TOTAL PORTFOLIO:

EQUITIES: 36%

• LONG: 36% ($ARUN $BX $NR $NTAP $SAPE $SWSI $POWR)

CASH: 64%

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MARKET WRAP UP 07/22/10

After the sharp decline that occurred in the final two hours of yesterday’s trading, many longs panicked out of their positions, while countless bears started to get excited at the prospect of another fast and furious multi week decline. Seeing as Mr. Market usually does that which frustrates the greatest amount of traders, it was only fitting that the senior indices gapped up 2% this morning and held their gains pretty much for the duration of today’s session.

With the S&P 500 closing up 2.25% to 1093, we now find ourselves back in a position where we have been at various points over the course of this correction, since April. With several key indices, sectors and individual stocks hinting at making major breakouts and bearish to bullish reversals, one has to wonder whether this will wind up being yet another vicious trap many into which many bulls will fall. As an example, turning wildly bullish on the morning gap higher on June 21st (not to mention at several other false breakouts in the past few months), would have been a huge money loser. The torture involved with acting on these false breakouts–and breakdowns–has made this market particularly frustrating for many traders who are used to making money in a trending market.

Thus, despite the improved daily charts that I am seeing, it is important to wait for more follow through and confirmation to the upside, before the bulls declare victory. As the updated and annotated daily chart of the S&P 500 illustrates, just because we broke out of the moving average “sandwich,” it does not mean that it is time to go all-in long just yet (see below).

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Please note that I tinkered with the upper trend line of the broad channel above, as I believe the new one more accurately captures the essence of the multi month broad trading channel of the S&P. Thus far, both the breakouts and breakdowns from this channel have been soundly rejected, each time.

Turning to other indices and sectors, the emerging markets, transportation stocks, small caps, and the Nasdaq all look to be leading us higher. Again, follow through is key. See my notes on their respective daily charts below.

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As noted earlier today here and in The PPT, I took some partial profits in $NR and $SWSI. I also initiated a position in $BX, based on its improved daily chart.

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TOTAL PORTFOLIO:

EQUITIES: 34%

• LONG: 34% ($ARUN $BX $NR $NTAP $SAPE $SWSI)

CASH: 66%

Those of you who follow my writings know that $FCX is one of my key tells for the broad market. See my notes in the charts below for details…

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A CHESS MOVE: I bought a 1/2 starter in $BX. Check out the chart below.

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A GROOVE: I am grooving to the music of the emerging markets. Their collective ETF continues to lead the market higher. If you recall, the emerging markets bottomed in November of 2008, several months before the U.S. did in March of 2009. Their updated daily chart tells the story of a series of higher lows since May, with tons of upside potential should it get–and hold–above $41 (see below).

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TOTAL PORTFOLIO:

EQUITIES: 34%

• LONG: 34% ($ARUN $BX $NR $NTAP $SAPE $SWSI)

CASH: 66%