Solitaire Trader

Weekly Review: October Watch List

So we ended last week with a down week, encouraging for my hypothesis of a big down autumn.

Still, it's not yet clear that we are going to have a down September.  This week's Technical Market Report by Mike Burk shows a concern.  We are not getting an increase in the number of new lows that you would expect if we are going down in a big way. 

Next week is critical.  If a big down September is going to happen, I would expect that Thursday's low would get taken out within the next couple of days.  If it doesn't, then it will look like a small pullback in an uptrend rather than a change of trend.  So I'll be watching that level carefully.

I'm starting to build my watchlist for October buys.  Here's what I'm looking at:

ARD, BOT, BTJ, CACB, CRS, EZPW, FORM, FMD, FSTR, GDI, GRMN, GYMB, HITT, ICE, ISE, JLL, LMS, LVS, TS, TWGP, WCC, WFR, WIRE

Most of these I'll be waiting for October to act on, but I'll be ready to jump in on a few of them if they look good before then.  I'm also looking at second entries into GROW and NEU.  I expect both to pull back and possibly offer good entry points.

I expect to do more trading this week, I might jump into some short term trades.  I need to have some exposure in case I'm wrong and the market doesn't go down.

Weekly Review

The portfolio continues to trail the Russell 2000 badly.  However, this week there are signs of improvement.  The ratio of up stocks to down stocks has improved dramatically.  There are now only 5 stocks down from their buy price in the portfolio.  Better yet, the amounts that they are down are only -0.1%, -0.4%, -0.7%, -0.8%, and -1.8%. 

The biggest problem is that there is only one big winner left in the portfolio - FMD at +53%.  And FMD was weak this week.

There are a few candidates for the next big winner.  ERS is the best bet, now up +17% on average since it was purchased 5 and 7 trading days ago.  That's a nice move.  FFIV and NTRI are both +8%.

I was early with the energy stocks, but this week it started to look like they might finally be moving.   GMXR, BRY, and PLLL all moved from negative to positive territory.

This week, I'll be concentrating on building up existing positions that are working.  Although there are 19 stocks in the portfolio, I still have over 50% cash (which gives an indication of how small I've been trading).  FMD is the largest position in the portfolio by far, many of the others need to be built up if they get successful.

Weekly Review: Missing the Rally

This week's portfolio performance says it all: I am completely missing this rally.  This is very frustrating.

The odd thing is, I've been trading very well lately.  Of my last 26 completed trades, 21 have been winners.  The biggest loser was a 7% loss, 8 of those trades were gains of more than 10%, and 6 were gains of more than 40%.  Since the portfolio last hit a high on February 1st, the realized gains for the year have more than tripled.  And yet account equity remains stuck in a zone about 2 to 3% below the high.  So what's going on?

One contributing factor is that I have a lot of cash.  I'm currently at 44% cash.  So I'm really only using about half my equity at the moment.  But still, even that half isn't going anywhere.

The annoying thing of the last week or so is that stocks that I've considered buying but didn't have been soaring, while stocks that I did buy just sit there like bumps on a log.  I've bought using several strategies.  My usual strategy of buying pullbacks of strong momentum stocks hasn't been working.  I've bought some breakouts, but they haven't worked either.

I've bought a lot of energy related stocks (PLLL, OIH, BRY, XLE, LUFK) in the past week because their charts really look like they have bottomed.  While most of them are up a little, they really haven't moved.

The last thing I want to do now is start chasing some of the stocks that have been blasting higher.  I'm clearly picking the wrong stocks, but trying to switch now would just make it worse.  I just think that this rally is just about over and it's going to come back down.  The last half of March has a history of not being very good.  What I'm looking for is the market to correct back and for the energy stocks to go back to their leadership status.  That's what the charts look like to me and that's what I'm betting on.  All the best pullback buy charts are energy stocks right now.  Since I've committed to playing the energy stocks, I'm going to follow through with it until they hit stops and prove me wrong.  It's really all I can do at this point.

No Weekly Review

There was no weekly review this past weekend because I was ill.

However, we can now answer the question from the comments of a recent post about when the change of month rally starts.  It starts today.

Weekly Review

The market rally from October to early February is over.

Yet some of the indicators have turned up.

So what is going on?

In the Technical Market Report:

The good news is:
• The DJIA hit a multiyear high last week and the DJT hit an all time high.

Most of the indicators turned upward last week and the remainder of the month has a positive seasonal bias.

Dow Theorists are very bearish.

Bill McLaren:

Last week we again, looked at my forecast for the year 2006 that called for a high on the [January] 11th and a low on the [February] 10th and a resumption of the fast trend up. Please understand just because the timing I laid out was exact doesn't mean the rest of the forecast is correct. I deal in probabilities not certainties, as there is no such thing as a certainty in this business.

The next 45 increment is February 25th and is a Saturday so we'll look at Friday or Monday. This represents resistance in "time" just as there is resistance in "price." If the index goes up into this date and is still below the high it could be setting up a crash scenario. There is absolutely no evidence to indicate that possibility at this point. But the time cycles the past 6 months could be setting up that way.

You can see this resistance in "price" is the third instance testing this level. The fourth test of resistance has a strong probability of going through. Since I believe this is a trend that started at the last low, the move up needs to comply with specific trending criteria. Any correction should comply with a first-degree counter trend or a move down of one to four trading days. The report for next week could be the most important of the year if these cycles do setup. We'll need to see if this is an established trend as forecast and if it can push through the resistance in "time" on the 25th of February and this current price level as I believe it will.

So Mclaren is saying that if this attempt at a new high this week fails, the market will likely go down big.  One the other hand, if it succeeds, we might see the blow off top to the bull market.

So it looks like this week is crucial.  Seasonally, the end of February and the first half of March are strong.  It would make sense that we would rally here for awhile.  Bearishness is very high, considering that we are barely under the highs.  Another big run up would confound the most people.  The second half of March is weak, so a short violent melt up for 2-3 weeks followed by a drop in late March is a decent possible scenario.

On the other hand, the 4 year cycle says that we should be going down big this year.  The Big Picture has an interview about this (see part I and part II).  The interview is pretty clear that we should be going down soon, although I think a quick meltup to a high in March is very consistent with this.

As far as the portfolio is concerned, I did a lot of buying last week but I still have a lot of cash (a lot of cash is unavailable as it is on the bus between accounts).  I'm positioned to make money if there is a move up, but I've got my stops in close in case we go down.  Friday's buys also gave me exposure to materials, oil, and gold, which look ready to move up again.  If that happens, most of my buys in the coming week should be in these areas.

Weekly Review

The rally since October is now over.

See Bullish Percents, Summation Indexes graphs

All 4 of these indicators have reversed and are going down.  With this rally over, I am assuming that the bull market since 2003 is also now over.  While it seems likely that there will be an oversold rally soon, with the decline of these indicators I don't believe it likely that the rally will reverse the overall decline.

Therefore I am expecting the market to more or less go down to its 4 year cycle low, probably this fall.  It is time to put the portfolio in bear market mode, which means my trading will be small positions.  I'm looking back at what worked in 2002 to get some ideas about what will be good stocks for 2006.

So here's where the portfolio stands now:

PTIE - 43% gain - with the high volume gain here on Friday I'm in as long as it holds support.

VRTX - 41% gain - nice comeback on Friday, I'm holding as long as it stays in an uptrend.

BMRN - 38% gain - it keeps bouncing around in the $11 range, as long as it doesn't drop from there, I'm in.

FMD - 36% gain - ugly reversal on Friday, but I think this stock could do well in a bear market.

GMXR - 25% gain - I'm holding as long as the uptrend holds.  This held up well while other energy stocks cratered.

BTUI - 15% gain - still looking good in an uptrend.

EXBD - 11% gain - gap held on Friday, this looks like it could go higher.

EXPD - 10% gain - in a solid uptrend.

APOL - 5% gain - had a really good day on Friday, this is another stock that could do well in a recession or bear market.  This was one of my best stocks in 2002.

IRIS - 5% gain - new uptrend continues.

BEAV - 4% gain - Friday's hammer might indicate that it cleared out all the stops below and is ready to move up.  I like the pattern of of slow, lower volume decline after a big move up, this often prepares for another move up.

PAYX - breakeven - indicators might be showing that the downtrend is over and it is ready to move up.

CBH - 1% loss - this hasn't gone anywhere yet.

SIE - 1% loss - Again, hasn't gone anywhere, needs to get going soon.

HANS - 2% loss - this didn't do what it was supposed to do, although it did recover well on Friday.  Needs to move up quickly or it goes.

PRLS - 4% loss - this is not looking good, it will probably go unless it goes up Monday.

FOSL - 18% loss - the insider buying last week didn't move this up as much as I would have liked.  I'm looking for the best exit on this one.

Actually, it's remarkable how good most the stocks in the portfolio are looking, even though the market as a whole looks bad.

Turning Point Portfolio Checkup

Since the market appears to be at a turning point, I'm going take a look at where the portfolio stands.

Of course, it is not certain that the rally since October is over.  But in my estimation, Friday's action means that the probability that it is over is now more than 50%.  That means that assuming the rally is over is the way to bet unless the probabilities swing back.

Here's how the portfolio looks this weekend (click on the symbol to see a full chart at stockcharts.com):

ARNA - 70% gain - bad day on Friday has the chart not looking good.  If the stochastic drops below 50, it might be time to get out.  The good news is that the decline was on below average volume.  The recent secondary offering has increased supply.

BMRN - 42% gain - price is in congestion.  The recent gap up on huge volume is encouraging.  The CEO just bought again on Feb 1 at 11.67.  I'd like to hold on to this one if I can.  Reports earnings on Feb 23.

VRTX - 35% gain - only two days off of a high, too early to tell if it is topping.  Still way above its trendline.  Reports earnings this Tuesday, Feb 7.

PTIE - 35% gain - has this one been going straight up or what?  The insiders clearly knew what they were doing when they bought in December.

FTO - 32% gain - getting very close to its trendline.  I suspect we are going to know whether this is topping or not very soon.  I've pulled my stop in close just in case.  Reports earnings Feb 23.

CRDN - 30% gain - this chart is sweet.  It could be topping, but looks like it is correcting.   Reports earnings Feb 28.

FMD - 26% gain - The Marb has been stuck in a tight range.  I'd like to continue holding this one through a market downturn, if its price cooperates.

GGP - 25% gain - this was looking good until Friday.  It is still well above trendline.  Reports earnings on Feb 21.

ITG - 23% gain - I really don't like the action of the last couple of days here.  Still well above long term trendline, but I might bail on further weakness.

UPL - 23% gain - similar to FTO in look and feel.  Earnings are on Tuesday, Feb 7, so the day of reckoning will be at hand soon.

GMXR - 19% gain - another energy stock in the same situation as UPL and FTO.  I've pulled my stop in close in case energy stocks drop.

BTUI - 10% gain - I really like the looks of this chart.  It could be getting ready to break out to a new high.  Reports earnings on Feb 16.

VPHM - 10% gain - the last 3 days down could be topping, could be correction.  Chart still looks fine.  They are eliminating their debt.  This has been in the same price range since September, missing the rally.  Could that mean it goes up if the market goes down?  I suspect we'll find out.

BEAV - 10% gain - everyone was loving the BEAV on Friday.  A power move up to a new high on heavy volume.  Self congratulation warning:  did I nail the buy point on this or what?  Ok, that's out of my system now.

EXPD - 6.3% gain - gotta say, this one looks pretty good too.

IRIS - 4.8% gain - this one isn't moving as much as the previous two, but jeez... MACD going up, nice trendline up in the past 2 weeks, as long as that holds I'm in.

EXBD - 3.0% gain - wow, that looks good too.  Big up move on Friday.  Earnings are on Tuesday, so we'll find out soon if the downtrend from December to January is over.

APOL - 0.1% gain - the uptrend here is slow, but steady so far.  I like the MACD going up and the stochastic.

FDS - 0.6% loss - this one isn't working and Friday looks bad.  This one is on a short leash - it's up or out.

SIE -  1.3% loss - new on Friday and not looking good already.  Needs to prove that the downtrend line is broken quickly.

AGIX - 1.5% loss - also new on Friday and also went down.  As an insider buying play I'll give this one more time, as long as the low doesn't break.

FOSL - 22% loss - Ouch.  Caught by a gap down on Friday.  The CEO has a lot of shares at about the same price I do, so there's still hope here.  There's a possibility he might add to his recent buys with this drop.  If so, the price could recover.  If not, I'll probably be out.

Weekly Review

This weekly review will be a little different than those in the past.  This week I'm going to look longer term.

The market has been in a rally since October.  We are closing in on 3 months of rally.  Let's take a look at a long term monthly chart of the NASDAQ bullish percent index:

This is a very interesting chart.  First thing I notice is that the bullish percents broke out of a symmetric triangle this month.  A downtrend in bullish percent highs since the end of 2004 has been broken.  However, also note that the bullish percents have gone up for 3 months straight.   It is clear from this chart that rallies of more than 3 months in bullish percents are rare.  There was a 4 month rally in late 2004.  The initial rally of the bull market in 2003 went 5 months.  There was a 5 month rally in 1997.  But 3 months is usually the limit.

Also notice that bullish percents are higher today than they were during the bubble in 1999.  You have a better chance of getting a winner with random entry now than you did then. 

Now here's a similar chart for the NYSE summation Index:

Same thing, although it hasn't broken the downtrend yet. Again, rallies more than 3 months are rare.

So what does this mean? 

My interpretation of these charts is that  this rally will end either in early February, early March, or early April. I expect another good week this week, although a couple of down days would not surprise me.  Then we will hit the February cycle high this Friday.

My intuition is saying that the end will not be early February because there is still too much fear in the market.  Not everyone has been sucked in yet, so there are still buyers out there who don't want to miss the rally.  Also, the experts say that the last part of a bull market is always the strongest, and we clearly haven't seen that yet.

If we get a really strong week this week, that could bring everyone in and that could signal the top.  There are signs this could happen.  The number of new highs last Friday was extraordinary, something not seen since last July.  The end of July was, of course, the previous top.

I hope that doesn't happen, it would be nice to get another month out of this rally.  I'm really pleased with how some of my buys this week are acting: BEAV, BRO, BTUI, EXPD, EXBD, FDS, IRIS, and VPHM are all looking like they are coming off bottoms.  They don't look they they are topping.

Here's the weekly Technical Market Report.  Highlights:

The good news is:

• The small and mid cap indices all closed at new all time highs on Friday.
• There were 278 NASDAQ new highs on Friday, the highest number recorded since 12/1/2004.

There is no insider buying of note except in small banks.  Actually, the insider buying in small banks is starting to interest me, I may take some action on that soon.

My plan for week: I still have a small amount of cash for buys, but my main concern will be watching for my buys last week to move higher.   

See you Monday.

Weekly Review

Current Market Status

None of the four indicators have turned over - the rally is not over yet.

Notable Insider Buying

None.

Momentum Stocks

Despite Friday's selloff, there is very little out there that interests me.  I'm looking at BRO, CTRN, FDS, IDSY, IFO, MWY, PGNX, SPIL, and STAK.

Market Blog Reviews

Technical Market Report

The good news is:
The small caps have been stronger than the blue chips during the recent period of weakness.

It is possible that Friday was the bottom because the ratio of upside to downside volume was extreme.

Top in the Making

Stock markets have started the expected first thrust down. However, they are still in the process of forming a major top. Further strength may be ahead after this first wave down will have finished.

Evening Star Spells Trouble for Global Equities

The week of January 16-20 was arguably the single most profound week for equities in years.

Trader Mike's Stock Market Recap

What looked like a great start to the year has quickly turned to false breakouts on the major indices.

The Week Ahead

It is amazing how quickly sentiment can change.  The market has one bad day and suddenly the sky is falling.  The pessimism of this weekend is no more justified than the euphoria was two weeks ago.

I have no idea where the market is going to go this week.  I'm just going to be prepared for whatever happens.  I have a small list of possible buys, but my main concern will be with the current portfolio.  I have a lot of nice gains to protect - I am setting stops in close in case there is a drop.  I may take some profits this week regardless of stops.  Of my big gainers, I am most concerned about BCRX - it is looking weak.  On the other hand, anything bird flu could blow higher on any day where there is news.

Weekly Review

Current Market Status

The market is in a clear rally.

Notable Insider Buying

None.

Momentum Stocks

There are no oversold momentum stocks that interest me.

Market Blog Reviews

Technical Market Report

Highlights:

The good news is:
Most of the major averages, even the XAU hit multi year highs again this week.

The market is overbought and OTC NH has turned downward, but seasonally next week has been strong.

The Week Ahead

I am pleased with the way I've been trading so far this year.  My winning percentage of trades is 62.5% and my winners have averaged 3 times greater than my losers, which means that the year has started with a nice profit.  The trick will be to keep this up (or at least not lose money) even when the market is not so favorable.

A lot of stocks in my portfolio have pulled back and will look very good if they break their downtrend lines.  I am considering adding more to existing positions rather than adding new positions right now.  As Trader Mike says in his Friday Recap, a lot of stuff is looking buyable again.