Every reason to go down

The market has has every reason to drop and test the 1050 area again. Maybe the guys & gals on Maiden Lane are working through the snow, but maybe the market just needs to climb a really steep wall of worry for now.

The new month begins on Monday. Expect the prerequisite inflo of cash into the stock and commodities markets–and expect our SPX 1120 area to be attempted.

I’m going out now to feed the shovelling gorilla. 2 feet of snow!

So, markets are hammered on the fear of a meltdown in Europe. Guess what? We are becoming them. All we need are union protest marches in Times Square or Pennsylvania Ave. Don’t worry, when the states start fucking with the union pensions and benefits because they are out of money, watch out.

In the meantime, Bernanke is kinda telling it like it is for a change. Hard to believe…But the truth usually hurts and the fact is the problems that hit in 2008 are still here–only delayed with about $2 trillion in “hard” dollars and $12 in “soft” dollars to cushion the blow. Notice whenever the market is weak we pundits trot out this fact? We do it because it is the 800lb. gorilla, ready to throw shit in our faces when we least expect it.

The market is on the defensive after tagging SPX 1112.42. Close, but no cigar to our target of 1120. The first downside line in the sand is at 1080, then at 1050. A test of the lower portion of the trading range could be a good thing if you are looking for the further definition of the lower portion of our trading range. A marginal break would be even better because it would get everyone scared and out. Watch for the spike in the VIX. So far it is stuck in complacency mode or telling us to get long this bruising sell off.

Yesterday Century Aluminum Company [[CENX]] was rocked–but only back to the middle of its trading range and to our average cost (11.50) without hitting my $10 stop. Don’t get me wrong–this is a shitty company and has been for years. But it is the de-facto trade for aluminum and the dollars’ effect on commodities. And some would call it cheap. My target is still 14.50–for now.

Goldman Sachs Group, Inc. [[GS]] remains the object of controversy and scorn because everyone in the world bought their shit. They are certainly not wholly responsible for the mess we’re in, but they are the only ones who have the money to cover some of it. We bought some on a break of 150 (149) and have set a super-tight 147 stop. That order is in, period. No fuckin around with this one. My target remains 170.

Oceaneering International [[OII]] is rocking the house. L-3 Communications Holdings, Inc. [[lll]] is consolidating. Kulicke and Soffa Industries Inc. [[KLIC]] is still a huge winner. Hudson City Bancorp, Inc. [[hcbk]] remains the nations best and most undervalued regional bank. And Telecom Corp of New Zealand (ADR) [[NZT]] should be bought every time it dips below 8.00. Current yield is 9% and safe…

I’m going out now to help the gorilla shake the snow off my bushes…

Century Aluminum Company [[cenx]] just reported a shitty number. They have been reporting shitty numbers since the stock was about $70. So today should be no different.

This stock has become the de-facto speculators aluminum trade. It is now back to what I paid for it about 2 weeks ago after buying it twice, near 11.50.

My target was 14.50 and it didn’t get there this time. I am setting a 10 stop on the stock and I will keep you updated.

My other names are holding well. But we will always adapt to the changing market condition if need be. So far, the SPX 1075-1080 area is my downside “stop and reverse” target. Pay attention!

Sorry I didn’t give this out sooner–but it’s not too late!

Guess what? The market is loving the Military Industrial Complex. The next $100 roll will L-3 Communications Holdings, Inc. [[lll]] Currently 91, going to $100, probably higher…

The Fly is not really human because he comes from the future where there are alien/human hybrids. He travels to his rocket ship by way of a space elevator. He is special. The rest of us, dare I say, are only human, especially me.

That said, I wish to first point out a great read from another blogger here at IBC, Chart Addict:

http://ibankcoin.com/chart_addict/2010/02/19/is-technical-analysis-for-idiots/

This story highlights the ongoing battle between technical and fundamental analysis. For years, nobody respected the charts because investors invested. Fundamentals mattered to investors. But that was a long time ago. Now, everyone is a trader, looking to catch the next move, up or down. For that, fundamentals matter little. Support, resistance, supply and demand is what matters–at least over the near term. That is the essence of what a chart is supposed to tell you.

I know about this battle because I helped bring it to the forefront. After the dot com crash, I started a service called “Hybrid Investors” that used both disciplines, merging technical and fundamental analysis, along with other factors, to make informed and low-risk trading and investing descisions. I have since taken my methods to a new service, createcapital.com.

Now, everyone uses the “hybrid” method of analysis. They say that you must use both to be successful in anything past the very near term. And they’re right. Charts are not for idiots, unless you don’t know how to decipher them. So learn!

Yesterday, the FED, in a surprise move, raised the discount rate. They did say since last year that the free money would end March 1st. So they are keeping their word for a change. The FED has been supporting and making a market in everything. They have been acting as the de-facto “specialist” for the capital markets. That cannot last. The handoff between nursing on the teet of the Treasury and standing on its own two feet is the next big risk for the markets. We’ve already had a 9% or so temper tantrum from Wall Street once the political pressure got too hot. The majority of the free money has to end. And so it shall–eventually.

Everyone feared this day. Yet the market opened down and is now up–without the wildness and volatility you may have been expecting. Yesterday I suggested a dip and then a rip. that is exactly what is happening regardless of the news. I would have been happy to get a pullback, but it is not ready to happen at this moment. There will be one soon, so be ready.

We are on our way to SPX 1120 and will get there shortly. Then I will determine if we should lighten up or not. Right now I expect to follow the discipline, but I remain flexible to adapting to the changing market condition and so should you.