After Market Close Sept. 2, 2010
"This Market May be Healthier Than Most Folks Realize..."
Last night, we wrote: "I suspect that everyone is looking too Bearish for September, but that doesn't mean that we can't get some selling too. I'm just thinking that this market may be healthier than most folks realize. In fact, I'll reiterate; non-financial companies' balance sheets are healthier than they've EVER been. They are hoarding cash and buying each other. That's good for the market. We still need to be quite careful, but don't get too Bearish."
Today made our Bullish comments look far too conservative. Still have had the right idea.
DJIA: The Dow broke out of the wedge with authority.
SPX: The S&P also exploded out of the pattern.
NDX: The Naz gapped up big. Island gap?
RUT: The Russell was also up big but there's a channel line above that may bring a reaction.
HUI: The miners were up then down. Still in an up trend.
RTH: The retailers gave a surprise performance.
SMH: The Semi's were up nicely but not decisively.
SFD: Smithfield is just rallying away.
VVUS: Vivus was up nicely on the day, but I'm not smitten with that stick.
GXDX: Genoptix came on, but the give back makes for some worry, still.
MATK: Martek romped today.
GPN: Global Payments exploded higher.
RDY: Reddy came on again and we're in.
TOL: Toll Bros took off. If we test, we'd want to buy it.
NTGR: Netgear broke up. A bit more and we'll own it.
CMTL: Comtech remains in pattern, but it doesn't look bad.
CLX: Clorox was up but too soon.
BDN: Brandywine sure looks strong here. Buy the break out.
PETS: Petmed Express rallied nicely off support. Looking like a Buy.
NWE: Northwestern is on the verge of a break-out.
Summary: We're glad we have the long exposure that we do. A lot of good was done today. The daily will turn up if we hold or push a bit higher. The weekly will too. Technically we're still in a Bear Market, but we'll be big Bulls long before that changes if we turn breadth positive.
Be Well, and Trade Smarter Than the Average Bear! -The ChartSmarts Team
Current Positions: SFD: Long 25% at 14.93, stop at 15.41 VVUS: Long 20% at 5.53, stop at 5.33 GXDX: Long 25% at 17.63, stop at 16.81 MATK: Long 25% at 21.68, stop at 20.77 GPN: Long 25% at 38.49, stop at 37.03 RDY: Long 25% at 29.24, stop at 27.91 Watch List: Buy 25% TOL on a limit of 17.36, stop at 16.09 Buy 25% NTGR on a print of 22.27, stop at 20.48 Buy 25% CMTL on a print of 21.71, stop at 19.96 Buy 25% BDN on a print of 11.59, stop at 10.66 Buy 25% PETS on a print of 16.41, stop at 15.43 Buy 25% NWE on a print of 29.09, stop at 27.92 Changes in Current Positions: Move the stop up on VVUS to 5.33 Move the stop up on GPN to 37.03 We are now 25% long RDY at 29.24
*30 Minute Trading Rule: In order to prevent whipsaws, we use a 30 minute trading rule. This means that, as a general rule, we are going to "sit on our hands" during the first 30 minutes of trading, this includes the lifting of stops during this 30 minute period as well. Additionally, if after the first 30 minutes of trading the range of the stock pick is within the stop and buy/short boundaries presented, the trade recommendation is valid. If the stock's range is outside of the buy/short and stop boundary, the trade recommendation is VOID. E.g. if the recommendation is "Buy a print of 10.25, with a stop of 9.95," and the stock trades up to 10.50 during the first 30 minutes, we would pass on the trade. Similarly, if that stock were to trade down to 9.90 before 10:02, the trade would also be void.
In addition, due to Market Makers, programmers, and market miscreants targeting our stops, a long pick must trade at a stop or below for a full 5 minute bar before actually triggering the stop. For a short pick, the stop must trade at or above the stop for a full five minutes before triggering a stop. This should have the effect of reducing the risk of 'gunning for our stops', though it will subject us to more technical risk. At this point, we believe it is a worthwhile trade off. There is no 30mn rule on limit orders, but if price gaps out of the buy/stop range the trade is void. Rule on stops: As a general rule for the model portfolio, we will lift all stops on existing positions for the first 30 minutes of trading. As a practical matter, subscribers may wish to leave their stops in place if they expect to be incommunicado or unavailable during that time to monitor positions.
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