child's play

The see-saw battle continues (and the outlook remain a bit foggy), this week it was difficult to tell who won, probably dependent on what sector is in your crosshairs. I think the DJ30 was even, the Naz was up 6 pts and the S&P was up 5 pts. So I guess the bulls won but one would have a hard time retiring on those types of moves. Diamonds and Spiders and Cubes....good hedging products but not much volatility compared to individual stocks. Simple math obviously (averages vs. idiosyncratic risk) and maybe not a bad investments philosophy (indices that is) if one has a nice long investment horizon.

I had some winners and losers on both sides of the fence this week. Optical stocks are moving up quite nicely (see tlab for an example). The semis continue to lag (see intc). How 'bout tivo? I use it, I like it, and the stock is finally getting some life back in it.

How 'bout the Goog? Announced that they are being added to the S&P 500, always good for a 25 pt pop...so obviously the index funds need to add it, but what about the managers who benchmark to the index, will they be adding to or opening positions as a reaction to the addition? Probably doesn't fall into the 'window-dressing' category given the goog's performance as of late, but still possibly the catalyst that could cause a move (one way or the other??)

Ramping up the market research, admin work, and capital raising next week, things are going to get busy - much busier than this busy week.

Happy Friday.

DJIA 11,279.97

NASDAQ 2,312.82

SP500 1,302.95

smart money

I saw something interesting over the weekend, someone noted that the Commercials, the so-called "smart money" in the S&P 500 futures market have loaded up their net short position to the highest level in more three years. A rather bearish sign if you believe that the Commercials are truly ‘smart money’ - interesting that the “small” players in the futures pit (read ‘retail’ investor) have a huge long position. If that isn't a screaming contrarian indicator I don't know what could be better, oh wait, I remember watching CNBC several years ago and they did a piece on shorting stocks, yep, fall of '02, right at the bottom. Bingo. The always right-on contrarian indicator gives even more weight to the bearish signal. I always reiterate that I don’t predict, I go with what the market is doing, goin’ up…long, goin’ down….short. Forecasting and prediction doesn’t get you anywhere except on the wrong side of the trade when the market doesn’t follow through with what you *thought* it would do. I’d rather be right than early. Recently we have had good sized run-ups in the markets (ok, 'good-sized' is relative these days), hitting the upward limit of their respective trend channels. As would be expected, my longs are doing nicely and my shorts are treading water and a few have even stopped me out. The Nasdaq has hit a 4 ½ year high. Don't worry, still 3000 points to go until the all-time high of 2000 and we're only 1000 points higher than the lows of 2002. Lots of optimism, yet the smart $ is expecting a big pull back… at least in the S&P’s. Do they think it is really going to be a hard pain-inducing sell-off, or just a comfortable drift back to the lower edge of the upward trend channel. No matter what they think longer term, right now they are thinking short.

ascending

Good week to be a bull. Dow moved up for the second straight week. S&P followed suit. Some of the recent leaders in the naz showed their strength. The mo-mo's got their groove on and ripped a bit. The weakest of the weak stayed the same or even sold off a bit. Gotta love it when that happens, best of both worlds.

So does anyone else think that Cramer is nothing but a glorified stock promoter? I wouldn't be surprised if someday if comes to light that he's getting something kicked back to him in return for going bonkers on air for some of these plays. Out of nowhere, he rants, the stock pops....my emotions on the guy are mixed, loved street addict, the tscm website is informative, but his light is shining a bit too bright for my eyes. On the other hand, he's cashin' in and laughing all the way to the bank...and isn't that the true reason we all are drawn to and play this crazy game?

Happy Friday.

DJIA 11,279.65

NASDAQ 2,306.48

SP500 1,307.25

applying 6-Sigma to the markets?

Got a big dose of 6-Sigma theory the past couple of days and got my mind thinking of whether there is any way to fit 6-Sigma into portfolio management and investing. If a bad trade is a defect and the goal of the 6-Sigma program is to reduce the number of defects, would it be possible to use the principles to execute risk control and reduce the number of bad trades, therefore resulting in a high number of good (profitable) trades? More on this later, I'm going to build out the thought process of this a bit later today.

picking and sticking the exit point

The markets (usually referring to the Dow30, the SP500 and NazComp) continue to drift in the trading range that we've been in for the last few months. Naz sold off this week and my shorts co-operated nicely. Good to see that. Had a few longs give up the ghost.

Tip: when you are stopped out on a stock, keep track of the stock after you sell/cover it. Note the date and price of your exit from the trade and then periodically check it over the following weeks and months. Every once in a while you'll regret selling it because you would have been in the money had you held on to it, but a large majority of the time, you were initially wrong about which side of the trade to be on when you took the position, and the stock has continued to move against you.

Lesson: when it hits your stop, sell or cover. Don't wait and begin hemming and moving the stop around to give it more room. Every so often the stock will do what you thought it might, but in most cases you will look back appreciatively on your exit as you would be down even further if you had held on....a big part of money management is risk control and with that comes the issue of ego, admitting your wrong and cutting your loss. Risk management is much easier when you don't let your ego get in the way. If you have problems handling that aspect, make the exits as systematic as possible, remove the human element of decision making if you have a problem letting go. Start fresh with a new idea the next day. Stay in the game.

Happy Friday.

DJIA 11,076.34

NASDAQ 2,262.04

SP500 1,281.58

donuts for everyone!

krispy kreme (kkd) names a new CEO, a guy who used to run the snacks division for Kraft. He gets appointed and the stocks pops 20%. Yeah, he might be a great guy, but the larger reason for the upside move is the sense that the financial irregularities and difficulties that have plagued the company may be behind the company now - or at least the bulk of the problems. The turnaround specialists are being replaced and will remain on board through the transition, but bulls are viewing this as a sign the dirty work is over and now it's time for someone to come in and steer the company back towards growth and profitability. Notice the stock crossed above the 200 dma about three weeks ago....for the first time in two years.

new week, sellers rule

Happy Monday.

Start the week off with a bang. As in stocks were shot down today after a pretty good week last week.

Check out a stock that looks ripe for a fall - ISRG, appears to be at it's tipping point, just a bit farther, the stop-sell orders will kick in and the thing is in a free-fall.


DJIA 10,958.59

NASDAQ 2,286.03

SP500 1,278.26