Decision Point®: Chart Spotlight 10/30/2009

After Market Close November 9, 2009

What a Day!

That was a heck of a rally we had today! Relentless...and oddly predictable. Folks have been trained. NOBODY wants to get "fooled again" by a Bear, so every time things turn down, they're going to take defensive action, and then the system gets clogged and the market rallies, forcing them to cover. And cover they should. The trend has turned back up.

DJIA: The Dow is right up near the top of the channel.

SPX: The S&P just ground right through resistance all day long. We did get a Best Fade Sell, however.

NDX: The Naz actually lagged a bit but it was still a good day.

RUT: The Russell was up but it lagged a bit.

HUI: The miners are through and out. Inflation, here we come!

RTH: Retail stocks are telling us that X-mas won't be a too bad.

SJM: Smucker's was up pretty big. We need a gap fill.

LNT: Alliant was up, but didn't quite get us.

IGR: IGR lagged the market a bit and I'm pleased by that.

INTC: Intel was up big. Not good, but there's a gap to fill.

COST: Costco romped and I'm happy about that.

NOC: Northrop Grumman had a big day, too.

SWY: Safeway romped too. We're in.

AAN: Aaron was up and got us in.

PLL: Pall broke up and we're long.

ACC: American Campus remains in pattern.

UMPQ: Umpqua was up but nothing dramatic.

GEO: Geo was up and down. Bearish looking to me.

TRN: Trinity was up but not out.

Summary:

We've turned a bunch back up and we're much more long, too. That's as it should be. I don't trust this market, but it sure seems strong and that means that we should be looking long every chance we get until they turn it over and nobody gets Beared up. The market needs to retrain all those managers before it can go down.

Be Well, and Trade Smarter Than the Average Bear!
-The ChartSmarts Team

Current Positions:

SJM: Short 25% at 53.18, stop at 53.97

LNT: Short 25% at 26.74, stop at 27.63

IGR: Short 25% at 6.24, stop at 6.24

INTC: Short 25% at 18.81, stop at 19.77

COST: Long 50% at 58.87, stop at 56.97

NOC: Long 50% at 51.49, stop at 51.49

SWY: Long 25% at 23.11, stop at 21.79

AAN: Long 25% at 27.83, stop at 25.87

PLL: Long 25% at 33.92, stop at 31.31

Watch List:

ACC: Buy 25% on a print of 27.77, stop at 25.54 -OR-
ACC: Short 25% on a print of 25.54, stop at 27.77

UMPQ: Short 25% on a print of 9.36, stop at 10.10

GEO: Short 25% on a print of 21.09, stop at 22.34

TRN: Buy 25% on a print of 18.83, stop at 16.96

Changes in Current Positions:

Move the stop up on NOC to 51.49

We are now 25% long SWY at 23.11

We are now 25% long AAN at 27.83

We are now 25% long PLL at 33.92

*30 Minute Trading Rule:

In order to prevent whipsaws, we use a 30 minute trading rule. This means that, as a general rule, we are going to "sit on our hands" during the first 30 minutes of trading, this includes the lifting of stops during this 30 minute period as well. Additionally, if after the first 30 minutes of trading the range of the stock pick is within the stop and buy/short boundaries presented, the trade recommendation is valid. If the stock's range is outside of the buy/short and stop boundary, the trade recommendation is VOID. E.g. if the recommendation is "Buy a print of 10.25, with a stop of 9.95," and the stock trades up to 10.50 during the first 30 minutes, we would pass on the trade. Similarly, if that stock were to trade down to 9.90 before 10:00, the trade would also be void.

In addition, due to Market Makers, programmers, and market miscreants targeting our stops, a long pick must trade at a stop or below for a full 5 minute bar before actually triggering the stop. For a short pick, the stop must trade at or above the stop for a full five minutes before triggering a stop. This should have the effect of reducing the risk of 'gunning for our stops', though it will subject us to more technical risk. At this point, we believe it is a worthwhile trade off.

There is no 30mn rule on limit orders, but if price gaps out of the buy/stop range the trade is void.

Rule on stops:
As a general rule for the model portfolio, we will lift all stops on existing positions for the first 30 minutes of trading. As a practical matter, subscribers may wish to leave their stops in place if they expect to be incommunicado or unavailable during that time to monitor positions.

Past Performance is not a guarantee of future returns.

Trading is risky. Trading entails unique risks, so get with your broker and do your homework before you take any trades based upon this or any model, newsletter, or trading service. Never trade with money that is necessary to your near- or long-term financial well-being.

None of the ChartSmarts™ Newsletters should be construed as a solicitation to buy or sell any security or commodity. We aren't your advisor and we aren't your broker. Any decisions you make are yours alone.

Though we do keep a hypothetical valued account track record, none of the performance referred to should be construed to be that of an actual account. Performance is not based upon back testing, and it does not represent an actual trading account unless explicitly stated. From time to time, we'll be trading the same ideas that we're discussing here. We make every effort to insure that we and our associates not "front-run" subscribers, or to otherwise affect the price of securities that we hold or discuss. Be aware that sometimes we, or our clients, family, or associates, will hold the same securities that we discuss in ChartSmarts. Occasionally, our trading actions may not be the same as those discussed in ChartSmarts, for a variety of reasons. We will never attempt to manipulate the price of any stock for any reason.
ChartSmarts (the "Newsletter') is protected by federal and international copyright laws. Equity Guardian Group, LLC., publisher of the Newsletter and owner of all rights therein, retains all proprietary rights to the Newsletter. Equity Guardian Group, LLC. hereby grants you, as a subscriber, the limited right and license to this issue. All recipients must receive the Newsletter directly from ChartSmarts.com. The Newsletter may not be forwarded or copied without the prior written permission of Equity Guardian Group, LLC.