The day that was - June 29th 2007

Some early buying on low volume led to end of day selling on higher volume. The DOW experienced an intraday swing of over 200 points. Up almost 100 by mid morning to down almost 100 by late afternoon. The combination of higher crude oil prices, the car bombs discovered in London, the holiday coming up, the already volatile markets conditions, and the end of the quarter “shifting” of assets by the money managers at mutual funds all led to the markets behavior.

Look at the DOW chart I have in my public chart list. Keep in mind that we are still inside a trading range. The markets are still undecided here. While I am bullish on the markets for the near future the fact that we are in this sideways trading range makes it difficult to get too heavy on new trades. What is happening here is that for every attempt the bulls attempt to rally the bears come to the party and kill it. Makes swing trades very difficult.

The one current open position in the FP80 portfolio (BIG) also pulled back on Friday but is still above the buy price. We are waiting for it to advance above $30.50 as a confirmation of more buying intensity before we go in with an additional 1/3 of our swing trade funds. Scaling into a swing trade or position trade is the safest and smartest way to trade. You get the advantage of having some of your money in at the lowest price while at the same time we are testing the trade (dipping our toes in the water). And if everything is OK then we go in all the way. Normally I would scale into a swing trade by starting with 1/2 of my normal swing trade funds allocated for any one trade. And upon confirmation of a successful setup I add the second portion. But with the increased volatility right now I am temporarily using 1/3 as my starting position. By doing this the risk is reduced even further if the markets take a dive and the stop loss point is triggered then the loss on the trade is even less than if you had gone all in from the start. Reducing ones risk is always a key to success.

To help illustrate the concept of how one should divide up their capital for swing trading see the chart here (click on the chart to enlarge). Remember, it does not matter how much you set aside for swing trading. The concept is to take whatever that amount of funds is and divide it up into 10 slices. And then each swing trade becomes one slice of your total swing trade funds.

I am working on some new swing trade charts and ideas. And I will post new charts by Sunday night for you to view.

Final thought for the day. The hype in Apple (AAPL) is done. The excitement in the iPhone is done. And for now the stock price of AAPL will likely pullback as the hype is quickly vanishing.

Sell off Friday

Selling is picking up as we get closer to the end of the day. With the news of another bomb found in London there is some additional apprehension about leaving money in the market over the weekend.

All sectors are selling off here into the close. Our play (BIG) is also taking a hit but it is still above the buy point and I have no worries about it. Looks like my prediction on Apple will come true and may close in the red. Big share holders in Apple have been selling today on the increased volume brought on by the iPhone hype.

As expected.. profit taking now taking over

Mid day update

The buying volume is generally on the light side. I’m expecting to see some profit taking in the afternoon leading into the weekend. Also with the additional news of explosive devices being discovered in London and the announcement that New York City is tightening security because of the events in London will likely have an added effect for the market today. The last thing the pros want to do is leave their money in the markets over the weekend when there is news that may give investors fear. So they like to take the money out and keep it under the bed until the “all clear” is given.

Apple is trading on high volume so far and soon I am expecting to see a lot of profit taking. I would not be surprised if Apple ends up closing in the red today.

Pre market view - June 29th

Trying to find something to gauge the market this morning and so far there is nothing notable to to get a clear picture of where we are going today. With the news this morning of a car bomb discovered in London I looked at the FTSE index and find that it is down currently. I don’t see any evidence that the London markets are being impacted by the news of the car bomb in their Country but instead it looks like it is down over concerns over our FOMC statement from yesterday.

The only stocks doing good this morning in London are energy related stocks. Oil producers and services are up while the financial sector in London is taking a hit. If we are to get a feel for how our markets will do today then I would expect to see some volatility in the financial sectors here today. And the oil and energy sector may have some buying today.

The Asian markets were up a little and Toyota was a big winner there.

Futures are down, gold is up a little bit, and crude is up a little and is over $70 (70 seems to have become a psychological number, people hear ‘over 70′ and it has an impact on people. So whenever we see crude go above 70 the impact starts to increase).

Yesterday after the market closed Research in Motion (RIMM) released their earnings and it was good. RIMM is trading up in pre market. This may have an impact on Apple (AAPL) today. With Apple already having a good run over the past couple months and today being the big iPhone day there is likely going to be some profit taking on Apple now. Remember that in trading the pros will use liquidity (volume) to get out at a decent price. Think of it this way, if you owned 50,000 shares of Apple and you wanted to finally take your profits you will wait for some big news event on the stock to sell in to. You take advantage of others buying so you can sell yours without it having a big impact on the price. Selling while others are buying is how large shareholders take their profits and slip away without it being noticed too much. With the iPhone being the big news all over the media it will probably bring “new money” into the stock as the retail investor will now want to get into the action. So they start buying and the big money will take advantage of that and get out. So we will see some added volatility in Apple today.

As I said last night I believe we will have another pullback in the major indices again soon but my long term view is still bullish at this time. We are still in a trading range in the indices so until we see the the break above this range we are still in a “yellow flag” condition.

The day that was - June 28th

All morning the markets were quiet. Everybody was just standing around waiting for the FOMC statement. It was expected that they were going to leave the rates unchanged so there was really no anticipation over that matter. What everyone was waiting for was how they were going to word the statement.

It’s interesting, the FOMC statement is gone over with a fine tooth comb looking for clues like it was something from Miami CSI! The analysts tear apart every word in order to determine what the FOMC members are really thinking. They are trying to read into the future. It is not good enough to simply take what the FOMC statement says on the surface, it has to be analyzed, x-ray’d, dissected, and scrutinized in every which way. In the end the general consensus is that the FOMC members feel the economy will continue to grow at a moderate pace over the next few quarters. And that inflation was generally in check but they did add this statement: “sustained moderation in inflation pressures has yet to be convincingly demonstrated“. That gives them wiggle room for the future and that kept the market from turning completely bullish. The overall mood of the statement was good whereas the markets are concerned, but it was not a strong call to arm for the bulls.

The FOMC statement can be read here.

The reaction after the statement was as expected, about 15 minutes of whirlwind gale force winds as everybody scrambled as the analysts started dissecting the statement. In the end the market still finished “OK”.. no bull rally, but no bear stampede either.

Tomorrow will be a real test as the statement will have set in overnight in all the market players and they will have been working on their playbooks for tomorrow. We will have to see what plays they have planned before we really know who wins this game.

But for us we will carry on as usual and let the market tell us what side to be on. Remember, in the markets we really don’t care who we root for.. we just root for who ever will make us money! If it is a bull market then wave the bull flags… a bear market then we wave the bear flags.. pretty simple. Right now it is a tie ball game.

The DOW chart shown here from today shows we ended the day in a ‘doji’ (means indecision). We also hit a minor resistance level today. I anticipate another pullback in the broad markets coming up. Will it retest support and bounce like it did yesterday? Or will it fall through? My felling is that we will go back up.

Our current open position (BIG) is doing well and almost hit the second buy point today. Original buy price yesterday was $29.20. It closed today at $30.41. Stop loss for this trade is $28.20.

I will have some new chart setups and watch lists soon. Note that on the right side of the web site I have added a section where current open positions will be listed as well as watch list items when they are added in the future.

Fp80

FOMC issues statement - looks bullish for markets

Calm before the storm ?

The day that will be..

Is in the hands of the FOMC and what their statement is when it is released at 2:15 today. So far it is a fairly quiet morning in pre-market activity. The Asian markets closed up a bit following our rally yesterday.

Apple (AAPL) is trading up a little bit pre market on light volume so far. The hype surrounding the iPhone is priced in to the stock at these levels I feel. Once the iPhone is released if there are any problems at all that make it to the press (dropped calls, phone locks up, problems with the battery life, etc) then some of this hype that is now built into the stock price will dwindle away. How do I feel about the iPhone? I’m not going to stand in line for one. I’m more than happy with my iPod and my Verizon Wireless phone. But I will say the iPhone is really cool!

So we wait for the FOMC statement. Just before 2:15 be sure to set paperweights on top of your desk to keep everything in place in case there is a windstorm reaction to anything they say. Usually when the FOMC issues their statements there is an initial reaction gust that lasts for about 10 to 20 minutes before settling down. Sometimes these initial gusts can be hurricane force and other times they are a mere sneeze. But with our turbulent market over the past couple weeks I predict strong winds around 2:15 today. Which way will they blow, now that I can’t predict. Only Ben Bernanke, FOMC Chairman, can answer that.

Quote of the Day

To affect the quality of the day, that is the highest of the arts.

… Henry David Thoreau 1817-1862

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