the Yuppie Pig

It's the first time we've headed into the weekend on a weak showing for the market. The question remains is, will this be another shallow type pullback? The previous two made their way down to the 200 period moving average on the hourly chart; where it is reaching now. It's also finding logical support at the 1040 level, making the "easy" part of the short trade over. I believe the 1058 area, previous support, now resistance, is the upper bound of where the market can trade if this momentary period of consolidation is just a pause before further downside. I remain bearish, but that buying every dip has been the winning strategy. As a result, I'll implement both. I'm looking for some further weakness to purchase some tech stocks (hardly knocked down my RIMM at all), while remaining short overall on the US consumer. I'm also bearish on commodities for the short term (particularly copper and oil), however the short broke down without me. Yes; annoyed.


Some of the commodities names did bounce back a little on Friday; FSLR being one of them. I think much of the competitive advantage on its input side has now eroded and its non-thin film peers are benefiting. However, its still priced at a premium. For comparison, TSL trades at 13.4x 2010 earnings while FSLR trades at 21x 2010 earnings.

The daily chart here is overbought, and the 60 minute chart shows a back test of the recently broken uptrend. My targets are 140 offering minor resistance; 130 as an objective short term measured move, and 115 at major support.


And finally, the jobs numbers are this week which will set the intermediate tone. It's not the actual number, but the reaction to the number I'm interested in. I'm expecting a little more weakness going into the number, but for volatility to settle down as traders place their bets beforehand.

Here's a daily chart of ATW. Relative to RIG, it trades at a premium on 2010 earnings. It's also got a nasty reversal candle today, on larger that usual volume. Indicators aren't constructive either. My target for this stock should the market and oil pull back, is 30 to 31.


On a shorter time frame, here's FCX. This 60 minute chart really shows the volatility in this name. I'm betting there are some aggressive buyers holding this name. Like ATW, if the market tops out here, FCX should find support at 66-67.

Today was a rather uneventful day, right up to the FOMC announcement, which in foresight and hindsight, was a non-event. The volatility in the market, afterwards, was something else. First thing, I wanted to note the short term bearish technicals. Pretty much, every technical indicator I watch, is now pointing to at least some continuation of the selling which ended the day. The RSI, MACD, Stochastics are all breaking down. Volume on the SPY and the end of the day, were at levels not seen in quite a while. First support level, is right near the close. 1057, and a break of that, should be followed by a quick trip to 1040. It's at this lower level, that I think the bulls will make a stand. We'll take it day by day.


While the stock market pushes higher, reflecting a supposed recovery, I have to wonder why the Baltic Dry Index has been trending lower and lower. This index, and other shippers are key to global trade. Shelves aren't stocked, if product isn't moved from one country to another. True, there is a massive supply of ships coming online, but the index is now approaching levels not seen, since global trade momentarily halted at the apex of the credit crisis. The chart of this index continues to break down, and is a major red flag to the long term bullish thesis.


Oil inventories remain high and I think its gotten to a top. Any higher, consumers start to feel the pinch at the pumps again. So for the moment, I think the top is in. And it needs to be in, for the economy to heal.


A very similar story for copper. Inventories have been building for weeks and while the world inventories are not yet at their peaks, the Shanghai index is. If previous strength in copper was due to real demand + restocking; at the very least, the restocking component is over.



All of this leads me to be bearish on commodities in the short term, if the market flees from the risk and high beta trades. The stocks I am looking at for shorts include:

FCX for a short on copper. It has continued to move higher with the market, outpacing the metal. Needs at least a pullback.
OXY for its correlation to oil. ATW as well, relatively expensive to RIG as part of the oil services sector. It also has a very toppy looking chart.

As this rally continues climbing higher, the risk reward in this game of bulls vs bears playing chicken with an elephant; just keeps getting more dicey. However, simply being over extended does not preclude the ability for the market to continue to rise. That's what momentum trading is all about. If I'm going to play along with this game, I'd prefer some lower risk names which have pulled back and may have a little catching up to do.

PWR is a name that has lagged a bit in the infrastructure sector. It has pulled back in the past week and is back testing a recent breakout from a triangle. A purchase here seems to be a good risk:reward in partaking in a continuation of this rally.

The company has had some decent growth in the past few years, and the electric utility space should continue to experience demand through a necessary replacement cycle of the North American power grid. It's trading at about 22x '10 earnings of 1.05, so it isn't necessarily a cheap name for the infrastructure space but its business is somewhat different then that its peers. This has tended to result in a premium for the name.

Gross Profit
2008 $634,866
2007 $428,747
2006 $315,816

Decent looking chart here. First target on a bounce off this broken downtrend line is the recent highs around 25.5 to 26. From there, the pattern suggests a move to about 29.

I can't speak too much about the current valuation of WYNN as it exceeds by far, what I believe to be any semblance of rational thought. Nevertheless, it is here.

However, I thought it noteworthy to highlight the technical pattern that may play out over the next few days, at least in the short term. There is clear support at 68, with next support levels at 64-65, and ultimately 60.

WYNN trades at an astronomical x86 times 2010 earnings. Its growth rate is up for debate, as the US settles in on the "new normal" for vegas spending. On the Macau side, there is legitimate growth, clearly offset by domestic stagnation. Forgive these paper napkin valuation estimates, but lets suppose it is able to return to its 2008 earnings of about 200M and apply a x40 PE on that. We get a 8 billion dollar firm, which is about where it is trading now. I have to think it is expensive here, by any stretch.


Currently short WYNN, but a clear break below 68 would give me much comfort in this otherwise volatile name.

It's not easy finding stocks to go long, as everything is over extended on the daily charts. But there are still some pickings to be made on shorter time frames. TQNT, part of the wireless cohort, still offers some value relative to peers, and is come off its recent highs. It now nears support at 7.6 for those looking for long exposure. And becomes a much more interesting buy at support above 7.2. For that to happen, the market is going to have to correct for more than 1 day. We'll just have to wait and see.

TQNT trades at a 15% growth rate, with 2010 earnings of 50 cents. That puts it clearly in the value camp for secular growth stories at current prices. It has also surprised to the upside in the past couple quarters giving the name some momentum.


Right now, all of the hourly indicators are in the oversold territory. Either a purchase at 7.6 or wait for the indicators to show strength and a new uptrend to begin, makes sense here.

After some thought and noting that profitability in trading and investing has consistently been better for me when I write/blog, I'm back to blogging.

10 days of upward momentum, and I have to start to become weary. Here's what I see in the short term. Indicators are starting to roll over, but the real test is a solid break of the uptrend line. A few prints below 106.5 should do it.