With no economic news on the calendar for Monday, the markets moved down from fears of a Greek default to a late day light-volume rally with the optimism that Italy may convince China to buy some of their bonds. As you have just noticed, we rallied on the rumor that China may help Italy, not Greece. This is how the market is moving these days, handcuffed completely to headlines. So, unless you happen to know the next headline, you can quickly be caught in the wrong direction creating significant risk.
This is one reason why many seasoned traders are still sitting on the sidelines and taking a break from the markets. Not having to make up losses means you are quickly profitable when the market finally acts healthy. Overall market participation is low right now, partially because this is a seasonally slow time, but also because the markets are very hard to trade if you are not very fast or have lots of capital to average down when you are caught in the wrong direction. This type of action will catch you in the wrong direction often, so your strategy must be prepared for it else you’ll be taking losses quite often.
I’ve been opportunistic when I can be without trying to be gambling or reckless. I’m still mostly cash and creating shopping lists of stocks that are acting better in a weak market. This creates favorable swing trade opportunities, but any long swing trades have an inherent higher risk due to the overall market conditions.
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I’d like to pick one stock to try and trade on and write about for you, but I find the risk of that too high in this market, especially with so much economic news the rest of this week (see calendar below). I’d feel more comfortable discussing shopping lists to watch and trade rather than one specific stock from that shopping list. When the markets become healthier, I’ll look to focus on one stock a week for the weekly trade once again. Until then, I’d rather stay mostly cash and play defensive.
| Date | ET | Release | For | Actual | Briefing.com Forecast | Briefing.com Consensus | Prior | Revised From |
|---|---|---|---|---|---|---|---|---|
| Sep 13 | 08:30 | Export Prices ex-ag. | Aug | NA | NA | 0.5% | ||
| Sep 13 | 08:30 | Import Prices ex-oil | Aug | NA | NA | 0.4% | ||
| Sep 13 | 14:00 | Treasury Budget | Aug | -$132.0B | -$132.0B | -$90.5B | ||
| Sep 14 | 07:00 | MBA Mortgage Index | 09/10 | NA | NA | -4.9% | ||
| Sep 14 | 08:30 | PPI | Aug | -0.1% | 0.0% | 0.2% | ||
| Sep 14 | 08:30 | Core PPI | Aug | 0.2% | 0.2% | 0.4% | ||
| Sep 14 | 08:30 | Retail Sales | Aug | -0.5% | 0.2% | 0.5% | ||
| Sep 14 | 08:30 | Retail Sales ex-auto | Aug | -0.2% | 0.3% | 0.5% | ||
| Sep 14 | 10:00 | Business Inventories | Jul | 0.4% | 0.5% | 0.3% | ||
| Sep 14 | 10:30 | Crude Inventories | 09/10 | NA | NA | -3.963M | ||
| Sep 15 | 08:30 | Initial Claims | 09/10 | 410K | 410K | 414K | ||
| Sep 15 | 08:30 | Continuing Claims | 09/03 | 3700K | 3700K | 3717K | ||
| Sep 15 | 08:30 | CPI | Aug | 0.2% | 0.2% | 0.5% | ||
| Sep 15 | 08:30 | Core CPI | Aug | 0.2% | 0.2% | 0.2% | ||
| Sep 15 | 08:30 | Empire Manufacturing | Sep | -5.0 | -4.0 | -7.7 | ||
| Sep 15 | 08:30 | Current Account Balance | Q2 | -$121.0B | -$121.5B | -$119.3 | ||
| Sep 15 | 09:15 | Industrial Production | Aug | -0.2% | 0.0% | 0.9% | ||
| Sep 15 | 09:15 | Capacity Utilization | Aug | 77.0% | 77.4% | 77.5% | ||
| Sep 15 | 10:00 | Philadelphia Fed | Sep | -15.0 | -10.0 | -30.7 | ||
| Sep 16 | 09:00 | Net Long-Term TIC Flows | Jul | NA | NA | $3.7B | ||
| Sep 16 | 09:55 | Mich Sentiment | Sep | 53.0 | 56.3 | 55.7 |
My shopping list can change daily, but after today’s action, here is a sizable list of what I’m watching for favorable entries. As you know, I like to buy near support levels or on high volume breakouts, so that is how I will be watching these. This ensures I can properly place a tight stop loss and minimize risk while leaving plenty of room for upside potential. If you buy away from a support level, you will have to put a stop loss that is too far from a true support level creating more risk or putting yourself in a position that you are likely to get stopped out too quickly. Here is the shopping list:
(Annotated Charts available upon request, just request it by clicking the top right button on the website labeled “chart help?”)
Vista Gold Corp. (VGZ)
Vantage Drilling Company (VTG)
Opko Health, Inc. (OPK)
Stamps.com Inc. (STMP)
Ulta Salon, Cosmetics & Fragrance, Inc. (ULTA)
Carmike Cinemas Inc. (CKEC)
Coldwater Creek Inc. (CWTR)
EZchip Semiconductor Ltd. (EZCH)
Optimer Pharmaceuticals, Inc. (OPTR)
Cavium Networks, Inc. (CAVM)
CVR Partners, LP Common Units r (UAN)
Hansen Medical, Inc. (HNSN)
In my current portfolio, I closed out my ProShares UltraShort Russell2000 (TWM) trade last week while I had modest profits to take. Today, I initiated a position again in Market Vectors Gold Miners ETF (GDX) as it fell towards $63 area. Buying gold miners on dips has proven to be a favorable trade in this market. I also started to add more to my speculative long-term play Dejour Enterprises, Ltd. (DEJ) at around $.28 with the intent of trading around a core position a bit more anytime it moves over $.30. This ensures that even when I take profits, I’m still exposed enough in case it wants to continue to run one of these times.
As always, do your own homework to see if you agree. Good luck out there,
Mike
At the time of publication, Kudrna was long DEJ and GDX but positions may change at any time.
