A Monday Playbook

By: Pej Hamidi

• The NASDAQ and Dow are at 2/3 retracements of their pullback from mid-January. What happens here is crucial. Is there follow-through? Or will there be a test of the February low first, or even perhaps a higher low? Did the Fed tip its hand and give the all-clear sign with the surprise discount rate hike?

• Overlay of the SPX and 10Y TSY YLD blares out a positive correlation between the two. More than with the 30Y TSY YLD Index.

• Special High Risk/High Reward Trade of the Month: Protein Design Labs (PDLI)

• Special Treat of the Month: Schweitzer-Maduit (SWM)–Barely missed the entry parameters and/or the $70 stop kept you safe on this (phew…), but now the stock appears ready to close teh gap at $36, 60% cheaper than where we first looked at it and $39 is the 61.8% retracement of the move. Most important of all, nothing has really changed. The collapse was mid-day. The company can’t figure it out. They’ve issued many releases since. They reiterated that there are contract renewals coming up in 2010 but they are the only supplier. The collapse, intraday imbalance looks to me like a forced liquidation, or an unwanted one. A fund had to meet a call somewhere else, and the first to go is the best performer in the portfolio. Keeping a very close eye on it.

Long:

• MSCI (Moody’s Commodity Sector)

• Defense Sector

• Internet Software & Sales

• Tech Hardware Vendors

• Vertical Tech Giants (e.g. IBM)

• Chip Stocks

• ISRG and PCLN both possible breakaway upside gaps

Short:

• Gold

• Oil

• Hang Seng (e.g. FXP)