CNBC Asia Segment on Banks and Oil

By: Scott Redler

The other day on CNBC Asia, I was on talking about banks and oil. Check out that segment here:

Oil Getting Ready to Ignite

By: Scott Redler

I only focus on oil a few times a year. Once was when it was going parabolic and on CNBC I said don't buy it and get ready to be short (it was around $140 then). It went to $147 and then dropped a quick $30. Then, this December with Mark Haines and Erin, I said to get long for a micro move at around $38-39.

That was then, this is now:

Oil is back on my radar for a momentum move in the coming weeks. The range is getting tight and there are lots of overseas catalysts and fundamental reasons developing. The bottom line is: technically it looks GREAT for a momentum move.

ALL TIME FRAMES ARE LINING UP. Here is the daily chart:


and the weekly:


$40.40 is my line in the sand. A daily close above and I will be actively trading it again. A trade above $84ish in oil and a close there should ignite another move to the $93-98 area.

THIS WILL NOT BE GOOD FOR THE STOCK MARKET and could lead to a May-June sell-off in the market. By that time the Dow could be in the 11,100-11,400 range and the S&P in the 1,200-1,225 area. I will look for the same setup that I saw transpire in January.

T3 Live: Take Control of Your Financial Future

T3 Live was created to empower main street with the tools to take control of its financial future. We have created the first fully transparent virtual trading floor to give individuals direct access to how professional active traders are managing money. We stress the importance of educating yourself, not following the herd, and being prudent. T3 Live traders have been in the market for over a decade and have seen just about every market imaginable, and we have made money in every single one. As the world rolls into a new decade we want to share what we've learned, with anyone who no longer wants to be at the mercy of the system. T3 Live is not just about trading. Its about living by a mantra.

Hmmmm....

By: Scott Redler

This remains a stock/sector specific trade right now. The action rotates every few days! As of now, Thursday’s outside reversal is “almost” negated! If we get a 60 minute close above 1,175 and you are still short from Thursday and added Friday, without lightening up yesterday, you will have some complicated decisions to make in the next few days.

Tech continues, BUT you need to be in the right place at the right time.

• Apple (AAPL)—is awesome. If you’re holding still, congrats! We’ve had many buys/trades at key points. It’s opening up $5. If I were still long it, I’d take some off, or sell some calls, BUT I said the same thing at $232 and now it’s $237.

• Research in Motion (RIMM)—hit a bit on the Verizon news. Earnings are out on Wednesday so this could be tricky.

• Amazon (AMZN)—looks like a good setup. I will watch it closely. I do think we can get a trade if it moves through $136.60-137 that takes prices up to the $140 area.

• Cisco (CSCO)/Intel (INTC)—still churning up a bit.

• Microsoft (MSFT)—needs to wake up.

• Google (GOOG)—holds $560 for now. As long as it holds that level, we could see some type of gap fill trade back to $580ish.

Casinos took the day off yesterday.

• Las Vegas Sands (LVS)—hangs tough. I will look to see if we get “one more trade” through $22.25ish for new highs at $23.

• Wynn Resorts (WYNN)—tight range up top. A move above $78 should be good for a trade.

• MGM (MGM)—I’m starting to hate this stock. Still no action. Unless we get HUGE HUGE volume above $12.80 it’s not going anywhere all that fast.

Banks also took the day off yesterday.

• JP Morgan (JPM)—actually gave me a micro short, but not sure if it will lead to more downside.

• Goldman Sachs (GS)—still hangs tough as long at it stays above $172ish. It could go again if it triggers above $175.50-176.50.

• Bank of America (BAC)—hangs tough and with more time should go higher.

• Morgan Stanley (MS)—had some life yesterday after they were chosen to underwrite the Citi sale.

• AIG (AIG)—got some positive remarks from Timmy G. last night and I like the pattern. A trade through $35.50-35.70 on heavy volume could get this going again.

Commodities

• Oil—looks ready to make an assault on the $84 resistance area. USO looks really good for a trade above $40.40 and a daily close could ignite oil for a move to the $90-9 area. List for some Iran-Israel headlines.

• Freeport McMoran (FCX)—super strong yesterday. Looks to go higher.

• U.S. Steel (X)—also looks like it should make new highs.

It’s a tricky trade right now. Very stock specific. End of the quarter is here, so we need to watch closely for a complexion change. 1,160-1,14 is the support that needs to hold for the rally to stay intact.

Video: Scott Discusses Market Strategy on CNBC Asia

Scott Redler discussed his market strategy on CNBC Asia last night, March 30th. He offers his insight on how to trade as we enter the second quarter and a new round of earnings reports.

Time to be Flexible, Not Stubborn

By: Scott Redler

Last week we had our first outside reversal in the indices since our last correction. That is a day to take note of, but not a day to get TOO opinionated. Smart traders and managers definitely cleaned up some of their positions (which is the prudent thing to do). The uptrend is still intact, so we need to see if Thursday gets negated, or if there is downside follow-through.

If we get back to a 60 minute close above 1,172-1,175 this will negate Thursday and squeeze this market back to the intraday high of 1,180 and then higher. IF we get a 60 minute close below 1,160-1,162, we can see the uptrend that started with the February 5th reversal come under pressure and the market will then be vulnerable to a corrective-type move like we saw in late January.

There are still a lot of decent technical patterns to trade--that supports the thesis that flexibility is KEY and that this is not a time to be stubborn.
The Rundown:

• Apple (AAPL) took off Fast on Friday, giving us clues that being short is tricky. It's now opening at new highs which also should give Bears some caution.

• Amazon (AMZN)--woke up last week and held tough. A trade above $137 could lead to bigger gains.

• Research in Motion (RIMM)--has consolidated since our last buy at $72.20, but earnings later this week so take care first.

• Intel (INTC)--still hangs tough since our $20.50 buy price.

• Cisco (CSCO)--still hanging tough as well.

• Microsoft (MSFT)--wake up a bit--around $30 it could get a bit more power.

• Google (GOOG)--absorbing the China headlines. Nice two-day trade last week. Could try and fill the gap from $568-580 if the market hangs tough.

The Banks--are tricky right now.

• Big reversal Thursday--then they gave up gains on Friday as well. Look here for clues to see if this opening gap fills.

• Goldman Sachs (GS)--was weaker on Friday, but still holding up. See how it handles this upper range of $172-178.

• JP Morgan (JPM)--nasty reversal Thursday, then closed off highs on Friday. Today will be a somewhat interesting day: does it have an inside day, or take out late last week's lows?

• Bank of America (BAC)--continues to churn higher.

• Wells Fargo (WFC)--continuing to grind higher.

• Citigroup (C)--slowly churnng higher.

• AIG (AIG)--still hangs by a thread--I might try another long if it gets above $35.50.

• The Casinos still look great!

• Las Vegas Sands (LVS)--this was very strong on Friday. It could get some more gains it it can push above $22.20-22.50. This has been a great trade for us since $19.

• MGM (MGM)--very FRUSTRATING--but maybe it just needed more time. I will still look here for a trade through $12.75-12.80 and a larger move to $13.50-14.50.

• Wynn Resorts (WYNN)--also hangs tough above $78. We should see low $80s.

• Gold--still very tricky. I'm stopped out, but a much bigger symmetrical triangle is building up with the level in GLD at around $110. That would be my new entry.

• Oil--continues to hold its upper levels.

Bottom line--it's never a bad thing to take profits and be prudent. It is a bad thing if you then get stubborn and fight the tape. Today should be interesting.

Nasty Reversal...

By: Scott Redler

...now time to look for some sell setups. The major indices staged an aggressive reversal yesterday. This is the first real indication that this market is reaching a technical top. Wednesday was the day to lighten up and yesterday was the day to deploy flexibility and short a reversal. Today will be very interesting. If the Bears have any control, they will not let the SPY take back $117.40-117.60 on a 60 minute basis.

For example of a trade I am anticipating, let's quickly talk about JP Morgan (JPM). I will look to short the bounce at around $45.50-45.60, BUT, if the Bears have any control, it should not get above $45.60 and hold for a 60 minute basis.

Watch yesterday's chart closely and see where certain stocks broke down from. Use those levels for sell setups. Then, if you get that good price and the market follows through to the downside, add more through yesterday's lows. Most indices also have rising channels that will give us the next parameters to start looking for further downside. Watch the action of market leaders for clues.

Click here to see my updated charts of the SPY and FAS for some clues as to what I am watching.

Major Topping Tails

By: Scott Redler

Yesterday I sent out a note across the T3Live community stating that I am sellnig my macro longs. This rally has met my targets and it's now time to get flexible. 1,110-1,170 was the "meat of the move." I did not see a topping-type pattern yesterday, but was just cleaning up my risk. TODAY we had a major topping tail--an outside day, RedDog Reversal, etc.--in all the indices. Many key stocks had nasty reversals: AAPL, the banks, commodities, etc.


The FAS:


This is why you don't chase moves. You can always leave a little on the table in order to be flexible and see a day like today coming.

This is a day to take notice. A day to pare down positions and really be flexible. I know it's a taboo, but maybe even "short the market" if you're quick and experienced. Now it's time to see if this rising channel that has been intact since February 5th gets violated.

Listen to the Megaphone

By: Evan Lazarus

X is looking like it’s been building a megaphone top chart pattern on the shorter time frames. The pattern is a relatively rare formation and is also known as a Broadening Top. Its shape is opposite to that of a Symmetrical Triangle. The pattern develops after a strong advance in a stock price and can last several weeks or even months.

A Megaphone Top is formed because the stock makes a series of higher highs and lower lows. The Megaphone Top usually consists of three ascending peaks and two descending troughs. The signal that the pattern is complete occurs when prices fall below the lower low.

Volume in the Megaphone Top usually peaks along with prices. It is usual to see trading volumes increase or remain high during the formation of this pattern. The eventual breakout and reversal can be difficult to identify at the time of its occurrence because volume does not appear unusual.

Take a look at this transpiring pattern in X:

AIG $35 Ready to Trigger

By: Scott Redler

This morning I said once again that when people start to hate AIG, we start to love it. I've had this stock 4-5 times right when it's ready for a technical move. Here we are again...the stock looks setup for a major move through $35 on heavy volume. We could see $38-42 when all is said and done. The stock has a huge short position and the market is strong. Get it on your radar!

Getting a Little "Frothy"

By: Scott Redler

The indices took a day off yesterday (an inside day). No reason to "worry" but as this market works its way higher, it is prudent to take some trades and protect some profits. I'm finding it hard to "sink my teeth in" with these types of trades. I will just trade setups now and keep it lighter and more flexible.

I am not calling a top--just taking some of my macro longs off so I can focus on quick cash-flow trades, like Google's (GOOG) reversal yesterday. There are still things to do, which is necessary if you're a professional trader, just that sometimes you have to stay more prudent/cautious than others.

The S&P has a nice upper flag. A trade through 1,174 could trigger an additional move into the 1,180-1,190 zone, but it's hard to buy heavy in that area.

The Rundown:

• Apple (AAPL)--is up over $4 since I sent my last chart--isolating the $226-227 area. Now it's over $230 and is getting tricky.

• Research in Motion (RIMM)--holding $74-77. No setup here.

• Amazon (AMZN)--this is taking a snooze. It's just dribbling lower, but can wake up and come back in play at anytime. No setup just yet.

• Cisco (CSCO)--adding some gains, but nothing wrong to write home off now.

• Intel (INTC)--great trade from $20.80-21 and now just pick your spots to take profits as we are now $22.50ish.

• Baidu (BIDU)--continues higher, but is tough to trade.

• Google (GOOG)--had a surprising reversal yesterday with the buy price at $542. It could take on some more gains it it moves above yesterday's high of $560. The next resistance area is $565-570.

• VMWare (VMW)--looks good and is holding up well. I guess over $54.70 it can go again, it's just hard to sink your teeth in up here.

• Semis (SMH)--looks good depending on the day.

• General Electric (GE)--had a monster move from $16.60 and another trade above $18.10. Now it's up to you.

Financials--

• Goldman Sachs--holding the $174-175 area. A trade through $177-178 on HEAVY volume could be worth a look for some more gains.

• JP Morgan (JPM)--this has been on a tear! I sold my macro position here yesterday. It's up this morning. I might try and scalp it short and see if there is some negative divergence.

• Bank of America (BAC)--I've been all over this since $15 or so. Nice move through $17.50. I sold some yesterday and had my guys sell August $18 calls to add more gains, because they didn't want to leave the equity just yet.

• Wells Fargo (WFC)--also had a nice move.

The Casinos:

• Las Vegas Sands (LVS)--a 10% move here is what we were waiting for. From $19-22 in 4 days is NIIIIIIICE. I took most off, and if I were you, I would sell some in the money calls to protect it. This could range out for a bit, but either way, the cash flow trade is in the bag.

• Wynn Resorts (WYNN)--this is the leader, but the move wasn't so juicy.

• MGM (MGM)--this is the dog--very frustrating. I will keep it on the radar as long as the casinos hold up. There is always the chance for a squeeze through $12.75-12.85 to take the stock back to $14, but it's very stop and go.

• The Dollar--this has been on a TEAR. It's putting some serious pressure on gold. I got stopped out of all my gold. I guess if the EU gives clarity in the summit, the Euro can bounce and the dollar will come off a bit. That is how we'd get our commodity bounce.

• AIG (AIG)--THE STOCK IS VERY FRUSTRATING. But, once everyone hates it, it has a big move if HEAVY volume comes in. I will trade it if it triggers through $35-35.50.

Sold Macro Long Positions Today

By: Scott Redler

I am out of all my longs as of today. I sold all my swing trades taking off all my risk on the long side. Going forward, I will only be using active three-day strategies from both the long and short side. I think the longer-term follow-through money has been made.

We’ve been in core longs since March 1st managing them accordingly based on the rotation between stocks and sectors. But now the market has hit my caution area at 1175-1185.

Note: I am not short the market overall here, I've just taken my macro longs off the table. The market can go higher from here but I will be smaller and more flexible with my trades. The meat and potatoes of the move that I was looking for was from 1110 to 1170. That move has completed and the rest is gravy.

Video: Morning Call 03-24-2010

By: Scott Redler

In lieu of my normal morning write-up, I decided to post my Morning Call video from this morning that subscribers to T3Live.com watch every morning before the open. This is one of 3 morning videos recorded for our community and just one of the many benefits of subscribing to our service. Take a 2-week FREE TRIAL for tomorrow's videos!

MGM Playing Some Catchup

By: Scott Redler

I hate playing laggards, BUT Wynn is at new highs and should see $80-90 area, and then $120 later this year. LVS had a Rock Star breakout on volume yesterday. It looks to have follow-through to $23-24 then on the weekly chart we can see $30 this year.



MGM is definitely the laggard, BUT on the daily and weekly charts it looks great! There is a heavy short position here. On the daily it seems like a trade on HEAVY volume through $12.70-12.90 opens the door for a move to $13.50. If it holds above $13 we will see an attempt to go after the old highs at $14.25. Ultimately on the weekly chart, it looks like $16-18 is attainable.

Past Resistance is Today's Support

By: Scott Redler

Yesterday we were looking at 1,150 on the S&P to hold and "surprisingly" it did--and fast. The Nasdaq didn't even get to its breakout level of 2,325. THIS IS A STRONG MARKET with lots of new setups and stocks keep taking turns. Then, they rebuild a new setup.

The Rundown:

• Apple (AAPL)--was the first stock up yesterday. This leader gave you clues that the market can bounce. It's now spent almost two weeks in a new upper level. I do see a new pattern for a momentum move--$226-227 is the area to clear to get this momentum mover back on the march.

• Amazon (AMZN)--I nibbled yesterday and will add above $131 and $133.

• Baidu (BIDU)--is all news and choppy. Looks like prices will move higher, but it's hard to trade.

• Intel (INTC)--is still hanging tough. Looks like $23 is next after our $21-21.50 buy.

• Google (GOOG)--I would avoid it. See how the stock handles $556. It could get pressured if it stays below that area, but it's hard to tell.

• Cisco (CSCO)--has held though above $26.50. It can continue higher.

• Research in Motion (RIMM)--still needs time. No real setup yet.

The Three Amigos--they're no longer friends anymore.

• VMWare (VMW)--this looks like it just re-setup and could go higher above $54.

• Cree (CREE)--this continues to stair-step higher, but needs time.

• Intuitive Surgical (ISRG)--did reverse yesterday, but no setup now.

The Plastics:

• Mastercard (MA)--looks good after my last buy. It seems like we can see higher prices above $248-250.

• Visa (V)--also just had a nice pull-in since our $88.50 buy. Everyone upgraded it at $92-93, maybe they will buy it around $90.

THE CASINOS ARE ACTING AWESOMELY RIGHT NOW!

• Wynn Resorts (WYNN)--is the cream of the crop. New highs yesterday and we should see over $80 soon.

• Las Vegas Sands (LVS)--this was our Rock Star yesterday through $19.65 then through $20.20 and $20.77. It should get to $23-24 in the next few weeks. Look at the weekly, we can see $30 by year end.

• MGM (MGM)**--This is the laggard. Laggards are tough to play, but this one can catch up. I will add through $12.70-12.90 on volume for a move back to old highs at $14.

The Financials--these need some time.

• General Electric (GE) is getting setup again after a big move. This could be worth more gains above $18.10-18.40.

• Alcoa (AA)--looks ok. If it keeps holding $14 and moving up it could be worth an add avoe $14.55. Then we'll see how it handles $14.90..

• Gold (GLD)--is not acting well. I would just keep it on the radar.

• Oil--after more time this might make new highs. It needs the dollar to relax.

• Freeport McMoran (FCX) and U.S. Steel (X)--both need more time.

Betting on the Casinos

By: Scott Redler

Las Vegas Sands (LVS) looks great here! They had an awesome presentation last week and I believe this sector is an excellent recovery play--with Macau and Singapore as a kicker. Technically the chart looks awesome. I am in Tier 3 and will add above $20.20ish. This one needs big volume. I would love to see it hold $20 then get a move through $20.74 for the big momentum move to $22-24.

Markets React to Passage of Health Care Bill

Technical strategist from T3Live, Scott Redler, appeared on CNBC's Squawk on the Street on 03-22-10 and discussed how the markets will react to the passage of the health care bill. As the market shows some weakness with the gap down this morning Redler wants to see how prior break out levels will hold (i.e. 1150 on the S&P500). Erin Burnett also asks Scott about commodities and Redler mentions the support levels for gold and oil.

Squawk Box 9:30 Today

By: Scott Redler

Look for me on Squawk Box this morning at 9:30. I have pulled together some notes for that session and wanted to share them with our T3Live community shortly before the show. Here they are:

OUR THESIS THIS YEAR IS TO MANAGE POSITIONS AND TRADE THE RANGES OF THIS MARKET--THE YEAR OF THE MARKET TIMER.

March 1st was the day that this market confirmed its new uptrend--the S&P at 1,110 was the time to get HEAVY. We then had a 60 handle move. Every index made new move highs. Volume was a big light, but there was healthy volume on individual stock breakouts. The rotation was great and the order was healthy: the Russell 2000, then the Nasdaq, next the S&P and lastly, the Dow.

So, after a three week rally, a pullback makes sense. Last week we saw momentum start to slow. Some key leaders made highs earlier in the week and diverged with the indices later on (AAPL, AMZN, BIDU, RIMM, etc). THIS GAVE US CLUES TO PARE DOWN POSITIONS AND GET A BIT DEFENSIVE!

NOW IT'S TIME TO MEASURE THE STRENGTH OF THE UP MOVE BY THE SIZE OF THE PULL IN! We will watch to see if the prior breakout/resistance level becomes new support. In the S&P that level is 1,150, and I do think they breach it to create some bearishness. I want to see the 20-day moving average hold in around the 1,135 range. In the Nasdaq, the prior breakout was 2,325 and the 20-day stands at 2,314. I will look at the S&P and Nasdaq in order to BUY THE PULL IN.

It seems like earnings and the private sector are trying to push this market higher and Washington is doing everything it can to keep the pressure on. The health care bill has passed and is yet another step toward Big Government and Big Spending. This is not good for the private sector and the market. We need to measure the composure of the market as we deal with all the Washington rhetoric. The market still needs to deal with the BLOATED state pension systems--will we "bail out" the states? There is a growing rift between the public and private sector.

The President SHOULD NOT be calling China a currency manipulator. Our support of Israel needs to stay strong--they seem to be wavering and talking tough with Israel instead by sending them a warning, etc.

The bottom line is--our thesis has been to time this market this year--trade the ranges, manage your positions. This will be a year to take advantage of the ranges in this market and to be a STOCK PICKER year when all is said and done.

Steroid Abuse Rampant...

By: Elliot Turner

First it was Lehman, then JP Morgan (JPM) and now we hear that so too was Bank of America (BAC) abusing the infamous "Repo 105" to the tune of $49 billion way back in 2006, hat tip to Felix Salmon for the news. On Friday, I compared the Repo 105 plot line with steroids in baseball and the more I thought about the analogy over the weekend, the more I realized it was right on. I wanted to draw this whole thing out one step farther: With Bank of America joining the club, we now know that many of the key players in this game of finance abused performance enhancers.

The discoveries, admissions and apologies all follow the typical narrative we witnessed throughout baseball over the last five or so years (I was thinking, maybe this is because baseball players and banks alike all use the same PR people?). More apparent now is that we had a commissioner (regulators generally speaking) who turned a blind eye to the problems because their players were hitting home runs by the dozen with one earnings beat after another, thus making the success of the institutions synonymous with the success of the system. Next, we have the fans (the shareholders) who cheered the earnings every step of the way while surrendering more and more power to the players themselves, while idolizing and worshiping the actors (think Greenspan=maestro) without ever considering the longer-term consequences.

Baseball and finance share an obsession with numbers and history. Much like steroids did with baseball, ultimately what hurts in the end are the "integrity of the game," the health of the actors (baseball players dropped dead on the field from "enhancements" and banks from holes in balance sheets), and the impact beyond the scope of the playing field in bringing negative externalities to society at large (remember in baseball the talk over the health of our youth). At this point we must ask: why is it that Congress has no problem using the anti-trust laws as a means to attack and control the steroid debate in baseball yet fears further involvement with finance?

Congress approached baseball in an antagonistic manner demanding immediate action. With finance, Congress holds the industry's hands, while singing koombaya, looking for campaign contributions and all-the-while saying "let's make a deal." Hopefully with the health care debate in the rearview mirror, we can have a more focused and committed Congress to reshaping our financial sector in such a way that it is self-sufficient and does not need government bailouts in order to stay solvent. Unfortunately, where this analogy ends is in the stakes. They are much higher with regard to finance than baseball and the consequence more far-reaching.

Confluences’ & State Street Stock Price Fluctuations

By: Pej Hamidi

A technician, or anyone looking for timing clues on their trades, looks for areas where multiple technical data points converge. This is what the "quants" do, except they write a program that does it for them, technicians look for them visually. Either way, it's the exact same principle at work. A congestion of data points will attract prices like a magnet. And a convergence of major technical data sets acts as a major pivot point most of the time. In the case of State Street (STT), I've included a weekly chart to show the panic low. Remember, the scaling is logarithmic otherwise we wouldn't be able to see a thing. The RED lines are Fib. Retracement lines from the rally off the low to the high. $40 was a key level, and it seems a bear flag has started to form over the past several weeks. The gray lines are Fib. Projection lines measuring the entire rally and pivoting off of $40.



I wouldn't take a position just yet without a little more digging here, but if you take a look at the daily chart, you'll see a very bearish candlestick pattern, a hammer followed by an engulfing bar, or the "Dark Cloud Cover". I swear I don't make these names up. But they do make me laugh sometimes. If I had a desire to get short this stock, I would look to enter somewhere in the upper range of Friday's bar. Around Thursday's high of $46.40 with a quick target of $46 to get a little feel for how the stock trades. Maybe re-entry around $46.20 and see how it starts to play out. Maximum 2 units until the trade is validated, at which point maybe a third and fourth unit can be added. I'll be watching it and will try my best to share the pivot points.

Although there are way too many confluences of technical data points to list, my favorite is the measurement of the bear flag is likely giving us the 2nd point in an uptrend connecting the March '09 low, assuming everything else is correct of course. Now, if my analysis is entirely wrong for now, meaning the stock has more upside room to go, then I would get long for a ride to $48.60 - $48.90. ENTRY on the LONG Trade is a strong break above $46.25, which will show the bulls maintaining control. If it's the bears, then target’s are 40, 35, and 32. Those are approximations, use your own numbers so we don't get clusters of orders. On the upside it's $48.70. Many "possible scenarios" but a plan for every single one. Think each trade through and imagine each possible scenario, so that when one of them manifests, you're prepared.

"On the Call" CNBC 3/19/2010

By: Scott Redler

Last time I was "On the Call" we were in the midst of a 9% correction. I said GET EXCITED: buy the dip at around 1,040 in the S&P. We hit 1,044 and that was it. Our thesis for this year has been to buy dips and be bullish on opportunities to buy stocks that look to be breaking out of great patterns. I am a market timer and I look to TIME THIS MARKET.

A slow "Tortoise Market" is a GREAT setup for market timers. You can see where the action is and add investments to areas that are working. There is very healthy rotation going on in this market and it is very trade-able.

First, the Russell 2000 broke out, then the NASDAQ, which is good. The market is best when led by innovation, small caps and growth areas. Next, the S&P broke out, and finally yesterday the Dow joined the party and broke its January highs.

People say where's the volume???? I say this is a different market. A lot fewer hedge funds, fewer brokers and fewer investors. On February 5th, the day the market reversed, we saw BIG volume. There have been many high volume breakouts as well, so it doesn't really matter that the overall market isn't trading with robust volume. We will probably see "volume" on the day that everyone gets excited and that will be our short-term top.

We've been long Apple (AAPL), Amazon (AMZN), Intel (INTC), Cree (CREE), VM Ware (VMW), JP Morgan (JPM), Bank of America (BAC) and Las Vegas Sands (LVS). We've been trading these from a net bullish stance and adding and taking off based on the right price patterns. The key point is that we've been net long all of them and they can still go higher!

I am long gold and think that gold has some consolidation to do now that the market made its move. Attention will be back here now, and gold can even exceed the December highs.


The S&P can see 1,230-1,250 this year, but we still need to manage our positions through the year. The Dow could see 11,200-11,500, and the Nasdaq 2,500-2,600.

There are however some risks, WASHINGTON being the biggest:

• Bloated pension systems need reform.

• Excessive entitlements that Washington thinks are deserved have to go.

• The health care bill and how house Democrats are shoving it down America's throat is a huge risk.

• President Obama's WEAK stance on ISRAEL is just wrong--he should be backing Israel with some back bone.

• And lastly, the President better be very careful with CHINA. If he thinks calling China a currency manipulator is a "good idea" then he doesn't know what a good idea is.

Trader Interview with Evan Lazarus

By: T3Live

Recently Evan Lazarus was interviewed by Tim Bourquin over at Trader Interviews. Below is an excerpt from the interiew, but be sure to click here and read/listen to the rest.

Tim Bourquin - TraderInterviews.com: Hello everybody and welcome back to TraderInterviews.com. Thanks for joining me for another show this week. As usual all of these interviews are about finding some ways to look at the markets or consider in trading the markets that you may not have considered in the past. Our guest today is Evan Lazarus and he's a trader, we're going to talk to him about his kind of method and style for approaching the market. So Evan thanks very much for joining me on the phone today.

Evan Lazarus: Thanks for having me Tim.

TraderInterviews.com: All right. So describe yourself as a trader, are you a day trader or a swing trader? How do you kind of classify yourself?

Evan Lazarus: I'm a hybrid. Actually, I get this question a lot. I'm hybrid type of trader. I run primarily day trading, but I do also swing trade as well. Generally, I run a portfolio as well as day trades, so I do both.

TraderInterviews.com: Are you technical, fundamental, how do you get your place?

Evan Lazarus: I'm 150% technical.

TraderInterviews.com: I assumed that right off from the get go, kind of how I've talked to you before we started recording and that sort of thing. So, all right, let's talk about some of these technical things you watch, what kind of things on a garden variety chart of something you're watching on a daily basis, what are you looking for?

Evan Lazarus: Well, when it comes to day trading, I'm generally focusing on three specific timeframes. My time frames are generally sub 13 minutes. So I generally look at a 5-minute chart, an 8-minute chart, a 13-minute chart, and maybe a 34-minute chart depending on market conditions and speed, and I generally stay away from conventional type of timeframes. Most traders of the technical background generally will look at 5-minute or 15-minute, a 30-minute and a 60-minute, those seems to be the most common looked at timeframes, but I found that by incorporating more Fibonacci type analysis in my trading, again those numbers being part of the Fib sequence, I had a lot great of success with evaluating different prices and timing some of my trades because as a day trader, timing really is everything. It makes a world of difference sometimes between 5 minutes and 20 minutes. So in order to follow the day trades, generally will look at sub 34, sub-13-minute charts. I follow two moving averages in 8 and a 21 EMA. I generally will trade with the trend of a stock, I'm not trying to pick tops or pick bottoms and I'm generally looking to buy pull backs and short rallies depending on whatever the particular scenario is of the current stock. So, I'm generally with the trend, I'm not a counter trend trader. I believe in simplicity, I think at the end of the day, a lot of day traders they can kill themselves because they self-mutilate. They're constantly looking for reversals. They're constantly looking for what I consider the hard money. And I think most of my success has been based on my simplicity of stay with the trend. Obviously, when we talk about trends as a day trader I really am focusing on ten days of like a window of ten days and I look at what the stock has done in that ten-day window to determine what the intermediate term trend or the short term trend is versus the longer term trend on the weekly or monthly charts, which really don't apply so well to what happens today. And I generally look for the most past in the day trading world I look for what I call committed direction. I look for stocks that are committing to the upside or committing to the downside and I can see that very clearly on like time frames when you have a series of higher highs or lower lows and the stock is basically speaking to you about going higher or going lower. And then I look to shorter pull back or buy a dip depending on the scenario. So it's a very simple process. I don't make it really harder than it needs to be and I'll tell you that one thing I've learned over my tenure as a trader is that most day traders make this way harder than it needs to be.

Be sure to check out Trader Interviews for more great educational interviews with top traders.

Steroids in Finance

By: Elliot Turner


When the "Repo 105" story first broke, my initial reaction was neither anger nor surprise. Clearly Lehman engaged in some fishy behavior in order to create a massive hole on its balance sheet. Problems of that scale do not happen by accident. I spent little time concerning myself with the plight of Lehman and quickly began thinking about the bigger picture: I wanted to know how widespread its use was; how complicit regulators were in this action; and whether Lehman and their accountants were acting within the regulatory landscape generated by courts and administrators.

What was equally clear to me was that Citibank (C) and Bank of America (BAC) at minimum engaged in a similar violation of the principles of fair accounting by shifting a significant amount of their liabilities to off balance sheet vehicles. After all, why else would they have needed such massive bailouts themselves? Citi's hole was significantly larger than Lehman's; however, they were labeled as TBTF and bailed out. Had they also failed I am sure we would be reading about Citi's impropriety along with Lehman's. Instead, thanks to Uncle Sam, the very actors who caused the problems at Citi continue to run the bank they drove into the ground.

Today my initial fears were confirmed: JP Morgan (JPM), one of the HEALTHY banks, claims to have used Repo 105 from 2001 through 2005. This story is starting to sound eerily similar to a host of steroids "admissions" in baseball. As the story goes, Player A gets caught using steroids. Shortly thereafter, Player A cries about any "transgressions or misdeeds" he may have done in the past. He claims to have acted selfishly and irresponsibly, but never directly refers to the specifics of his wrongs. Generally after the fake admission, yet more evidence surfaces as to the guilt of Player A, at which time standard operating procedure calls for a more specific, but equally vague response. This is the "I was injured and only used it in a very limited manner" phase of the steroid game (notice how it's still not called steroids, it's just "it" in the admission language).

Sometimes that player will create a Straw Man and say that he uses enhancers, but not steroids and that these "enhancers" were within the boundaries of the law, the rules, and the spirit of the game. This leads the press on tangential analysis into these enhancers. After still more time, additional evidence surfaces to directly connect Player A with steroid use well beyond the scope of rehabilitation from an injury and in clear violation of the law and the spirit of the game. In the end, just as everyone knew all along, Player A was most certainly on steroids and it was most certainly in an effort to boost his performance.

The most troubling aspect of this whole steroid game is that many players who inherently wanted to do the "right thing" were forced to take steroids in order to compete in an imbalanced playing field. Without steroids, it became impossible for even a supremely skilled human to compete with a 'roided up super-freak. At the end of the decade, what we learned was that not only were the "bad guys"--guys that we suspected to do anything to get an edge--acting improperly, so too were the golden boys. The taint spread far beyond the "poisonous tree" to the point where a presumption of guilt pervades the entirety of the player body.

It is time for Congress to put together a Mitchell Report for the financial industry. If we can do it for baseball--our national pastime-- so too can we do it for the industry which caused an economic collapse of major consequence on a global level. We need to know not necessarily who the actors were, but how widespread this misbehavior was. Furthermore, we must know how complicit (or negligent) the regulatory bodies were in fostering an environment in which every financial institution was on the equivalent of steroids and needed to be in order to compete in the game of generating short-term earnings per share beats. Without a much deeper understanding as to the nature of the crisis, it is impossible to create a coherent and stable structure for the future. How can we engage in debate about financial reform while we are still naive to the mechanics with which institutions elude reform? Putting pretty laws on paper does nothing when all they are is pretty words on paper. If we can take action against steroids in baseball, we can do it in finance as well.

A Golden Swing

By: Marc Sperling

I am buying some gold right here (through the GLDs) looking for an initial target in the $113 area. If it takes out the $113 area, there this precious metal could easiliy move up to $115.

Time to be VERY VERY Selective

By: Scott Redler

The S&P 500 tagged 1,170 yesterday and then sold off a bit. My target zone for this market back when "the wedge" resolved to the upside was 1,170-1,190. So, with the overbought nature of this market, the setup must be REALLY good to take. The market still feels like higher prices are in store, but if you are sitting on some big gains, I would recommend going out a few months and selling some calls to protect positions and collect some premium.

The Rundown:

Tech:

• Apple (AAPL)--great trade for us above $202 and again above $210.50 and $215.50. Now it's building a new base between $221 and $227. No "real" setup just yet.

• Amazon (AMZN)--this too is resting after its juicy buy at around $121. The stock needs more time to trade its new range.

• Baidu (BIDU)--is a monster! It had its first two down days, but nothing drastic. No setup here.

• Google (GOOG)--gave us some small trades. Now with the news that it might actually leave China, it could stay under pressure. Watch the gap in front of it for a tell.

• Research in Motion (RIMM)--gave us three days of nice action after the breakout of $72.10. Now it's acting sluggishly. I am flat it and will avoid for the time being.

• Intel (INTC)--this gave us the move we wanted through $20.80 and $21.50. I have a small mount left, as it could work its way to $23ish.

• Microsoft (MSFT)--is lagging and it could play catchup if it wants to. This needs high volume to ignite through $27.70.

• Cisco (CSCO)--this had its stretch before the product release. Now it's creating a bull flag and could push through $26.50.

Financials--Big move here! If you can't sell some, sell some in the money calls to protect gains and add a little value.

• Goldman Sachs (GS)--great trade through $160, with some follow-through extension that took it further than I would have thought. It had a doji close and is overbought. They might try to close it at around $175 for options expiration tomorrow.

• JP Morgan (JPM)--met all our long expectations. I'm flat now.

• Bank of America (BAC)--still inching higher but not compelling right now.

• Wells Fargo (WFC)--since our buy at $27.60 this one has come a long way. I now sold some.
  

• General Electric (GE)--gave us a GREAT three-day move. I took the trade and actually got short some yesterday--just for a trade--big open interest at $17.50 here.

• Freeport McMoran (FCX)--is lagging the indices, but had a nice move before that. Nothing here right now. Negative candle yesterday could take this a bit lower.

• U.S. Steel (X)--ugly reversal after a move from the lows. The meat of this up move is over in my opinion.

• Alcoa (AA)--we went a note to get involved at $14. It could continue higher today and play some more catchup.

• Gold (GLD)--I am personally long. THE PATTERN IS STARTING TO LOOK BETTER TO ME. I think everyone NEEDS TO BE LONG SOME GOLD. Add if it can get above $1,150 and stay there.

• AIG (AIG)--I hate this stock, but there is a decent bull flag setup. I will buy for a trade if it can slice through $36-36.50 with VOLUME.

• I'm long tier two in the casinos--WYNN, LVS AND MGM--they are in a conference today and could see some news-flow.

• Retail has been a MONSTER, but I don't really trade those names.

The bottom line is: the time to get excited and get heavy was weeks ago. Now is the time to play a bit of defense and be very selective about the trades you take--both long and short.

Some Morning Highlights

By: Elliot Turner

• Yesterday afternoon Nike (NKE) reported blowout earnings, beating on both EPS and revenues. On the report, the stock rallied to new all-time highs. The earnings in the sector are really starting to backup the explosive rally in retail of late.

• This morning FedEx (FDX) also reported a beat on EPS and revs, yet the stock is trading lower due to vague and semi-weak guidance. Over the last two days, the stock had attempted to fill its last earnings gap from mid-December. Looks like that will take a little more time right now.

• In yesterday's session, "A total of 130 S&P 500 companies hit 52-week highs today, or 26% of the index. No companies hit 52-week lows." This is a great illustration by Bespoke highlighting the expansion in new 52-week highs as the rally continues. There is no question that the increase in bullishness from traders, analysts and investors alike is reflective of the expansion of participation in this rally. Whereas in the past there were significant divergences as the indices made highs, right now we are truly seeing some cross-the-board strength.

• Tomorrow is the ever-feared "Quadruple Witching" where stock options, index options, futures options and single-stock options all expire. Adam Warner of the Daily Options Report does an excellent job of debunking some of the day's myths as well as providing the rationale behind some of the wacky moves we tend to see. This is an must read for traders.

• The Big Picture asks the question as to whether the April 1st end date for the Fed's MBS purchase program will mark the program's end, or merely a pause. With inflation remaining low, and the Fed continuing its aggressive monetary policy, there seems to be merit to the argument that it will ultimately restart at some point in the not-too-distant future. The expectation of its continuity in MBS trading pits sounds an awful lot like moral hazard in action to me. A little scarier than quad witching!

Anything but "Normal" according to David Rosenberg

By: Lee Vechione

I have followed David Rosenberg, who is the Chief Economist/Strategist at Gluskin Sheff, for about 2 years. He is known to be out of consensus and really gives you an alternative look at where we are in this recovery cycle versus many of the main stream views that are currently circulating. In today's morning note, Rosenberg highlights where we would be if this was a "normal" cycle:

• Employment would already be at a new high, not 8.4 million shy of the old peak.
• The level of real GDP would already be at a new cycle high, not almost 2% below the old peak.
• Consumer confidence would be closer to 100 than 50.
• Bank credit would be expanding at a 14% annual rate, not contracting by that pace.
• The Fed would certainly not have a $2.3 trillion balance sheet.
• The government deficit would not be running in excess of 10% of GDP or twice the ratio that FDR ever dared to run in the 1930s.
• There would be a ‘clean’ 5-6 months’ supply of homes on the market, not the 21 months overhanging as is the case now when all the shadow inventory is included from the foreclosure pipeline.
• The funds rate would not be near zero and one in six Americans would not be either unemployed or underemployed.
• Mortgage applications for new home purchases would not be down 13.9% year-over-year (just reported for the week of March 12) on top of the already depressing 29.4% detonating trend of a year ago.

If you are interested to receive Dave's morning note, you can sign up here: Gluskin Sheff

Vista (S)print for the Contrarion in All of Us

By: Pej Hamidi

It's not too often I find a stock that shows money flow (1) diverging from very early in the trend. This is very strange behavior because it shows persistent liquidation into the 400% rally since the Nov. '08 low near $15. My proprietary momentum oscillator (2) also shows a negative divergence which begins around June of 2009. The Market Panic of '09 obviously had no affect on VPRT. Instead it behaved more like a safe haven for investors trying to hide from the carnage.


It's definitely an "online play" because of the company's unique automation of the design and production process. This automation starts at the design step and ends with the delivery of the order. Highly efficient no doubt, but worthy of a P.E. of 39 in this market environment? The question is, how much more can earnings grow to catch up with the P.E. and bring it down, hence justifying these nose-bleed prices in the stock. Imagine your local print shop having 41,000 customer PER DAY! That's why investors love this stock, perhaps a bit too much.

It's a matter of time before competitors like R.R. Donnelley (RRD), which has twice the market cap PLUS a 5% yield (although negative earnings because of its June 2009 acquisition of a company that's aiming to do exactly that which VPRT has mastered). I love VPRT as a growth stock, but my instrument panel on the weekly chart is showing five bearish clues; the fifth being declining volume since last September. Was last week's technical action a Doji? Will there be a pullback to $50 to test the prior all time high, where the first Fib. retracement line falls as well, or will there be a deeper correction, perhaps into the 40's? This company didn't go public too long ago so there's not much data to work with, and I don't like shorting a stock when it's engaged in such a solid trend. However, sometimes a contrarion play is warranted, and with the right execution on entry, it could be profitable very fast.

The Regional Banks

By: Elliot Turner

As promised, I will follow up on my post from yesterday evening with some more on the regional banks. Before getting to the chart, I wanted to expand upon my statement that the Dodd financial overhaul provides an improved regulatory landscape for the regional banks. With the implicit guarantee against failure/losses in Too Big to Fail (TBTF) banks, government helps cheapen the cost of capital for these institutions. Bondholders know that they do not face the same risk of default with such an institution as they do with one that lacks that implicit guarantee. This leads to a misallocation of capital towards TBTF banks and away from others. With Dodd's plan to grant breakup authority over Too Big to Fail institutions and the creation of a bailout tax, this should help level the playing field for the cost of capital between Too Big to Fail and run-of-the-mill institutions.

Adding fuel to this move is the fact that some of the larger institutions may seek to increase their depository bases in an attempt to improve their balance sheets and increase their capital base. Just days ago, the Wall Street Journal floated the idea that Barclays (BCS) would seek out a regional bank purchase in the U.S. to expand their presence in the U.S. and increase their deposit base. This is a very positive development for a sector still well off its pre-crisis levels.

Now let's take a look at the chart. Below is a monthly chart of the RKH, one of several indices of regional banks. Take note how the index rallied back to the 38.2% retracement level off of the March 2009 lows and has since been digesting in that range for nearly half a year. This month, the index has finally broken out to the upside and now there is little resistance to the left for some time:

"Extended Period..."

By: Elliot Turner


...those two magical words just won't go away. Make that nine consecutive FOMC Meetings with no change to the terminology (thanks Brandon for the #). Ben Bernanke is a scholar who understands the impact that language has over future expectations and on promoting investments in the economy. Language is one of a central banker's most effective tool with interest rates already at the zero-bound. Clearly the Fed remains concerned about the state of the economy and just as clearly, the discount rate hike on February 18th did not signal a policy shift just yet. The question begs, when will the Fed actually shift course and begin tightening liquidity? And, just what catalyst is it looking for to begin doing so?

The Federal Reserve has the dual mandate of promoting both full employment and price stability. Considering the fact that disinflation (or deflation) rather than inflation remains the short-run concern, I believe that in accordance with its dual mandate, the Federal Reserve feels that it is both prudent and necessary to maintain its aggressive monetary policy stance. How and when this will change remains to be seen; however, until there is a significant uptick in employment data, downside economic risks remain discomforting. The Fed will not set an inflation in the future (a policy that will give it better control over the long end of the year curve) despite the fact that it could potentially improve the employment picture in the long-run due to the concern that they will risk their inflation fighting credentials. I am sure that this factors into the "extended period" decision for the short-run.

That being said, it is our job as traders to identify where trades live based on the information at hand. With yesterday's financial overhaul bill put forward by Senator Dodd, and the FOMC's decision to maintain 0% interest rates for an "extended period" one winning sector will be the regional banks. Some of these banks have had nice runs recently, but in looking at the monthly charts, several look as if they are just getting started. I am writing this from home, so I do not have access to my charting platform; however, I will post some strong ones in the a.m. With 0% interest rates, a steepening yield-curve, and a potentially more favorable regulatory environment provide just the right catalyst to further fuel the breakouts on the monthly charts.

Taking the Trade in GE

By: Scott Redler

I sent out the following General Electric (GE) chart on Friday, as the stock was ready to break above $16.60.


It's now almost $18 and I am done with this trade:

An Update on the Casinos and Intel

By: Scott Redler

After yesterday's shakeout move, the casinos are back on their way higher. These charts all look very much intact and excellent for long opportunities right now.

Also Intel (INTC) from last week looks great! We should see $22-23 very soon:

Trader Digs Up Ancient Inverse Head & Shoulder's Pattern

By: Pej Hamidi

Agilent Pharmaceuticals (A) has been on my "long-term bottom" list for a very very long time. Seriously, I thought this thing was ready 5 years ago, after completion of the right shoulder and a break of the neckline in early '06. But then she failed and collapsed to close a gap from mid '05. Fine. So then she tries again, valiantly over and over, the whole while bumping up against this overstretched neckline in late '06 and early '07. Prices oscillated above and below this neckline, as if they're wrapping around it like a snake. This love affair lasts until mid-2008, when prices broke above the neckline for the last time, abruptly did a u-turn and commenced to cascade all the way back down, to test the 2002 low.



Edwards & McGee, in "Technical Analysis of Stock Trends", tell us that H&S patterns can occasionally be "consolidations". How would we apply that to this case? As prices oscillated from '06 to '08 around the neckline, there was a lot of distribution taking place. OR, we can interpret it as the slow and steady accumulating of the stock by a very large or several very large institutional funds, and when the banking crisis started, general market risk aversion routed Agilent like any other stock. The '08 Banking Crisis and the '09 Market Crash took everything down with it. Including Agilent. But alas, there is a silver lining to this story. The prior low was not taken out, like the majority of stocks around the world, and has once again, after a wonderfully bullish trend that started in March of 2009, crossed above that neckline. The question is, "Is the pattern valid anymore as an indication of a reversal?". I would say the inverse H&S from back in 2002 to 2003 does not carry as much weight, if any, as it used do before the cascade sell-off. Also, the duration of the pattern is of concern as this dance with the so-called neckline has gone on far too long. What's more important is the fact that the prior low was not breached, unlike most other stocks, and prices did not have a difficult time rallying back in a solid, unbroken trend, back to the mid $30's, where the neckline would extend out to. But since most traders don't look back more than a few months, if not weeks, it's unlikely this pattern will be noticed at all. But I've noticed it and it's back on my radar.

Profitable Trading To All.

Fed Day!!!

By: Scott Redler

Today is one of those ever-important Fed Days. My gut tells me that the Fed finally removes the "extended period" language from their statement. That is the next logical step in the progression towards an exit strategy. If they do this, the market may get hit hard, but it would be an emotional, BUYABLE move.

Some leaders were hit yesterday, but money rotated into new sectors and the indices held up.

This is why you gotta love analysts--JP Morgan just upgraded General Electric (GE) to a momentum play after a three day move:

J.P. Morgan believes that, for the first time in over 10 years, the pieces are in place for earnings upside, a key to moving GE from value to momentum. They believe credit losses are peaking and should begin to decline in mid-2010. They still see normalized GE earnings of ~$2 in 2013 (note consensus for 2013 is at $1.72), though the trajectory, especially at GE Capital, is likely to be more front end loaded, a positive. They are a penny ahead of the Street for FY10 and at $1.30 for FY11 vs the $1.20 consensus; they note positive revisions would move GE decidedly into the momentum camp.

Here is the chart I put out on Friday:

Book Review: Freefall by Joseph Stiglitz

By: Elliot Turner

Joseph Stiglitz is one of the most important, yet somehow under-the-radar economist today. In Freefall, Stiglitz provides readers with a narrative of the events leading up to and during the financial crisis and Great Recession. He does a masterful job of diagnosing the problems, critiquing policy decisions and creating a comprehensive forward-looking vision of what an economy SHOULD look like. This last aspect is where Stiglitz truly excels. While others have offered excellent narratives of events, exposed some of the many villains and immortalized its heroes, Freefall provides readers with a depiction of what an ideal big picture landscape looks like.

The book begins with an equal opportunity rebuttal of the policy choices made by both the Bush and Obama administrations to date. Then, Stiglitz makes quick work of those who argue that this crisis was “unforeseen” and “could not have been anticipated” while dissecting the sources of this failure in foresight. Too many in the financial sector and the field of economics placed blind faith in an ideology which preached that in the event of a problem, all wrongs would be isolated and fixed by the market's self-correcting tendency to find an equilibrium. It is this ideology—the efficient market theory—that Stiglitz seeks to destroy in Freefall with gems like:

“If the efficient market hypothesis had been right and market participants were fully rational, they all would know that they could not beat the market. They all would then just “buy the market”--that is, someone with .01 percent of the country's wealth would buy .01 percent of each of the assets....The very fact that market participants spend billions...trying to beat the market itself refutes the twin hypothesis that markets are efficient and that most market participants are rational.”

Stiglitz won the Nobel Prize in Economics and attained international acclaim for his work demonstrating the asymmetry of information in markets and rebutting the notion that markets are inherently efficient. The zero-sum nature, in which one person's loss is another's gain, combined with the presence of externalities in and of themselves are evidence of inefficiencies. A common theme throughout Freefall is the belief that it is government's obligation to minimize the impact of negative externalities through a thorough, but not overreaching regulatory system, while maximizing the prevalence of positive externalities with a more forward-looking economic stimulus that generates increased investment and jobs growth. Additionally, he argues that the very idea of too-big-to-fail is in and of itself a market inefficiency that leads to a widespread misallocation of capital. With the talk of the Volcker Rule seemingly swaying markets on a daily basis, this timely explanation by Stiglitz highlights the rationale behind its necessity--controlling moral hazard risks and finding a solution to our unbalanced financial system.

Stiglitz' incorporation of the global elements of this crisis further distance Freefall from other "crisis" books. One of the more intriguing ideas put forward is that of a global reserve currency. As the former chief economist at the World Bank Stiglitz witnessed first hand the asymmetries of the movement towards globalization and free trade and the negative consequences of growing global imbalances. He illustrates how global imbalances lead to the suppression of aggregate demand and heightened economic instability on a global level. The idea of a global reserve currency originated with Keynes nearly a century ago, and it is fitting that Stiglitz is its torch-bearer today.

The analysis and prose are excellent throughout and difficult economic concepts are explained in a very readable manner. Where Stiglitz truly shines is in the last two chapters: “Reforming Economics” and “Towards a New Society.” He takes the lessons learned from the issues leading into the financial crisis and their troubling outgrowths and offers his view of a coherent, forward-looking economic landscape. Right now decision makers react with ad hoc policies and no clear vision or plan. What Stiglitz would like to see is an actual underlying set of principles that we strive towards and consciously contemplate in reaching important policy decisions. This is exactly what our country needs in one of these most uncertain of times.

Exchanges Getting Heated in Sino-American Relations

By: Lee Vecchione

This weekend, Premier Wen Jiabao gave his annual news conference where he continued his increasingly defiant tone again the west and criticism of U.S. economic policies. In my report, I discussed the growing threat of China becoming a net seller of U.S. Treasury securities in the coming year after the administration sold $6.4 billion of arms to Taiwan. After Mr. Wen’s news conference and the current push of lawmakers labeling China as a currency manipulator, I am increasingly confident of this materializing.

In his remarks, Mr. Wen said “these moves have violated China’s territorial integrity” and that “the responsibility does not lie with the Chinese side but with the United States.” In addition, he defended China’s currency policy against the U.S. administration’s call to let the yuan appreciate. “We are opposed to the position of engaging in mutual finger-pointing or taking strong measures to force other countries to adjust exchange rates,” said Wen. A global double-dip recession was also discussed in context of continuing high unemployment and sovereign debt challenges within Europe and the United States, which could pose a risk to China not meeting its growth targets in the coming year.

As the drama continues, Tim Geithner must decide to officially label China a “currency manipulator” in his bi-annual agency report due on April 15th. Today, 130 law makers wrote a letter (Lawmaker’s letter on China Currency) requesting for Geithner to designate the manipulator label and to “apply countervailing duty law in defense of American companies who have suffered as a result of the currency manipulation.”

In my opinion, it is time to stop deflecting the blame and take responsibility for our own actions. The U.S. government needs to tighten its own fiscal policy and take concrete steps to construct a credible plan to reduce spending, renegotiate entitlement programs, and promote free markets. The answer is not in protectionism and further monetizing debt as Paul Krugman argues in “Taking On China”.

Another Buyable Pullin

By: Scott Redler

As the market maneuvers in a semi-chaotic fashion this year, our mantra has been to trade it. So, when we came in today, we pointed out the ascending channel that typically gets resolved to the downside (descending channels typically resolve to the upside). With the action of the market's leaders trading below Friday's lows--like AAPL, GS, etc.-- we expected a little selling. Sure enough, this ascending channel has broken to the downside. This move should help relieve the overbought condition in the market and create another BUYING opportunity.



The compelling zone, in my opinion, that must hold is the 1,118-1,128 area on the S&P. Once we hit that spot, we will review the landscape in order to anticipate the next move and be ready to get involved when no one else will want to.

A Different Kind of Plastic

By: Scott Redler

Recently the plastic was the credit card sector, this week it's the casinos. There is a big conference this week focusing on the fundamentals of the casino sector. Technically, all three major casino stocks that we have traded for the past year look ready to move AGAIN!!

Wynn Resorts (WYNN)--this is the class of the group. A trade on heavy volume above $72 and we should see $75 quickly before making new 52-week highs.



Las Vegas Sands (LVS)--this is where I am hearing the money should be. Macua is doing great and there are no problems with Singapore. The stock is hovering below old highs. I would watch this closely. If we get a move above $19.90-$20.10 on heavy volume, we should see $21-22 quickly, and ultimately $24 before the Summer.



MGM (MGM)--this one is heavily plagued with bad headlines, BUT I love a good short squeeze. Seems like $11.95-12.05 should open this up for another move back to the $14 area or higher.



I will be hawking this sector during the week. When they move, they move quickly.

The market is a bit overbought, so this could take a few days to play out. I would like to see the S&P holding 1,135 before getting to aggressive. I'm sure Vegas owes at least some of you cash, time to make it back trading the stocks the right way!

Bio-Boom

By: Pej Hamidi

Why fight it? The Biotech Index is in all time high territory, as if 2008 and its fallout year, 2009, were just mere blemishes on this chart's rise to astronomical levels. The chart displayed here is a monthly 5-year chart of the BTK. I've overlaid a Fib. Projection grid, which are the red lines, and you'll also notice a Gann Fan, which are the dashed gray lines. What I try to look for when I do this type of chart work are major areas of convergence where there are multiple intersections of moving averages, fib. lines, and Gann Fan's, as well as support & resistance levels. In this case, there are many but the most important one comes at the prior all-time high, which was tested in October and November of '09. I'm not sure if you can tell without actually clicking on the chart below, but you'll see that the prior all-time high fell right on top of the 100% Fib. line right after bouncing off a Gann Fann for an almost 10% correction.


There are 2 other variables quite close to that test of the all-time high, but I'll let you find them. After testing 810, prices rallied directly to another intersection of key lines: the 161.8% Fib. line with another Gann Fann line. As soon as the 10-Month Simple Moving Average caught up with prices, it's like the index went parabolic on us, making a b-line dash to the next key Fib projection of 281.8%. Everyone keeps talking about how "tech has led this rally", but when you look at this chart, it makes you think again. Although AAPL, GOOG, BIDU and a couple others are at major highs, it's really been the Biotech that's been the high flier and most importantly, off the "talking heads on CNBC's" radar.

What now? Well, the index just rallied over 30% in about 6 weeks, and is hitting that KEY 261.8% Fibonacci Projection. Therefore, I think the BTK is entering a short-term top, which is what we market-neutralists like to see in a sector we like to own. From here, perhaps a 50% retracement to 1100 or a 2/3 retracement to 1060. Either way, this chart tells me that a leading sector may enter a significant short-term correction. If it does, it won't be alone as I suspect the whole market might. But as Sperl's has been telling all of us over and over, "DO NOT FIGHT THE TAPE". Instead of trying to short this market and get squeezed, wait for the pullback in leading key sectors and start buying the leaders when they've reached their key support/retracement zones.

Profitabe Trading to All and I'll "see" you on the radio around noon to talk about some of the things I'm looking at that are working. The objective for me is to have the long and short side of my book working for me. That doesn't mean "pairs trading", although that falls under the umbrella of market neutral. My goal is to have a group of stocks that only rise because of the tide and when it comes time, I hit the bid. I also have a group of leading long stocks I want to buy on pullbacks. But the point is to try and make money on both sides of my book while staying not necessarily "Dollar Neutral" but in fact "Beta Neutral", which is something I'll explain when I head to NY to do a class on it.

An Intro to Dow Theory

By: Evan Lazarus


Before Charles Dow began writing the theory that bares his name over a century ago, the idea of speculating on the markets was considered rather foolish. Yet still, the Dow Theory is regarded as one of the leading authorities on basic market philosophy and is relevant to all traders. Dow Theory stresses technical analysis and the idea that focusing on price action can help determine the presence of three primary movements within the market, including:

• Primary Movement

• Secondary Movement

• Daily Fluctuations

The primary movement is what most investors commonly identify as the "bull" or "bear" market. In other words, the primary movement is the general trend of the entire market and can last from several months to multiple years. In an upward trend, or bull market, prices continue to climb and establish new historical highs with a succession of higher lows. There may be temporary fluctuations in pricing, and these are known as Secondary Movements.

Secondary Movements are really known by different names according to when they are identified. The rule is that they will be shorter and in the opposite direction of the Primary Movement. If they occur during a "bull" market, the secondary movement is commonly referred to as a market correction; in a "bear" market, the secondary movement is known as a rally.

Daily fluctuations vary greatly and can be caused by a number of factors, including world events. As with the secondary movements, daily fluctuations may buck the primary movement temporarily, but the market will continue traveling in the same overall direction until it is time for a primary trend change.

At the end of the day, Charles Dow believed that trends existed, could be identified, and that technical analysis was the best method for perceiving them. Dow and his followers were not necessarily concerned with identifying the exact point where a trend change would occur just that they existed and could be capitalized on once identified. The earlier the trend was spotted, the greater the potential for profit. Some technical indicators used to help identify trends include:

• Moving Average

• Simple Moving Average

• Exponential Moving Average

• Moving Average Convergence Divergence Indicator (MACD)

Although varying aspects of Dow's comprehensive theory have been disputed, the fact remains that the overall philosophy remains sound. The same principles that govern the equities markets also govern other markets: that trends exist, tend to persist over time and can be identified through technical analysis.

Indeed, technical traders tend to be the most successful because they are constantly testing their investment strategies using the most accurate analysis available. This greatly increases their odds of identifying and capitalizing on the long term trends first identified by Charles Dow. It is interesting and amazing to note that not until Charles Dow started compiling the Dow Jones Industrial and Dow Jones Rail Index and started writing about the stock market a little over one hundred years ago, stock speculation was regarded merely as a game for the rich or as gambling for the brave. Sure, there were the tape readers, but the majority of the public regarded Wall Street as a source of excitement - the entertainment provided freely (unless you were on the wrong side) by figures such as Cornelius Vanderbilt, Jay Gould, and the infamous Daniel Drew.

In a series of stunning editorials for the Wall Street Journal at the turn of the century, Dow laid out the foundation of his own theory on the stock market. Among them were:

• The market is always to be considered as having three movements, all going on at the same time.

• The first thing to consider is the value of the stock in which the speculator proposes to trade, the second the direction of the main movement, and the third the direction of the secondary movement (i.e. stocks fluctuate together, but prices are controlled by values in the long run).

• There are three phases to both a primary bull market and a primary bear market (not to be confused with the three movements mentioned above).

• The formation of a "line" in the averages indicates accumulation or distribution

• The market represents a serious well-considered effort on the part of far-sighted and well-informed men to adjust prices to such values as exist or which are expected to exist in the not too remote future.

The method of making money in stocks, according to Dow, was to study basic conditions and exercise enough patience to capture the major movements. One of the few speculators who discovered this relatively new concept of making money on Wall Street at the time was Jesse Livermore. He was able to accomplish this only through trial and error and the making and losing of several fortunes as was highlighted in the classic book Reminiscences of a Stock Operator (a must read for anyone!).