Free Newsletter: Stalking Stocks with the Shark

Free Newsletter: Stalking Stocks with the Shark

Lifeless Action To Begin The Week
RevShark 12/29/2008 10:58 PM

Another dreary day of trading yields modest losses.
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Free Newsletter: Stalking Stocks with the Shark

Free Newsletter: Stalking Stocks with the Shark

Lifeless Session Yields Modest Gains
RevShark 12/27/2008 9:11 PM

... not a creature was stirring, not even a mouse.
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Free Newsletter: Stalking Stocks with the Shark

Free Newsletter: Stalking Stocks with the Shark

Ho-Ho-Zzzzzzz
RevShark 12/24/2008 2:53 PM

The market was able to post modest gains by the end of Wednesday's abbreviated trading session.
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Free Newsletter: Stalking Stocks with the Shark

Free Newsletter: Stalking Stocks with the Shark

Santa: MIA
RevShark 12/23/2008 11:22 PM

Buyers were nowhere to be found again, and the market took some short-term techncial damage.
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Free Newsletter: Stalking Stocks with the Shark

Free Newsletter: Stalking Stocks with the Shark

Was Santa Laid Off?
RevShark 12/22/2008 10:22 PM

After falling to their worst levels in over a week, a late spurt of buying helped the indices finish well off their lows..
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Free Newsletter: Stalking Stocks with the Shark

Free Newsletter: Stalking Stocks with the Shark

Dip Buyers Take The Day Off
RevShark 12/17/2008 11:10 PM

An afternoon of steady pressure kept the dip buyers, who have consistently made their presence know over the past few weeks, from making an appearance.
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Free Newsletter: Stalking Stocks with the Shark

Free Newsletter: Stalking Stocks with the Shark

Market Digests Recent Gains
RevShark 12/17/2008 11:10 PM

We are simply trying to navigate a counter-trend move in a time of year that enjoys a positive bias.
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Free Newsletter: Stalking Stocks with the Shark

Free Newsletter: Stalking Stocks with the Shark

Volatility Still Wagging the Dog
RevShark 12/15/2008 11:19 PM

Despite the overall weak action, the market is still poised for further action to the upside..
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Free Newsletter: Stalking Stocks with the Shark

Free Newsletter: Stalking Stocks with the Shark

Investors Shrug Off More Bad News
RevShark 12/11/2008 11:19 PM

Automaker headlines dominated the action, but market players consistently bought weakness throughout Friday's trading session.
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Free Newsletter: Stalking Stocks with the Shark

Free Newsletter: Stalking Stocks with the Shark

Choppy Session Yields Modest Gains
RevShark 12/10/2008 10:19 PM

The major indices finished Tuesday’s trading session well into negative territory as the market digested two days worth of strong gains.
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Free Newsletter: Stalking Stocks with the Shark

Free Newsletter: Stalking Stocks with the Shark

Market Consolidates Some Recent Gains
RevShark 12/09/2008 10:08 PM

The major indices finished Tuesday’s trading session well into negative territory as the market digested two days worth of strong gains.
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Free Newsletter: Stalking Stocks with the Shark

Free Newsletter: Stalking Stocks with the Shark

Market Rallies Despite Ugly Jobs Data
RevShark - 12.07.08 09:40pm

It was another day that saw a very wide trading range, as a steady sell-off in the morning following a very ugly jobs number was replaced by an afternoon of buying that allowed the major indices to close out the day just under the highs of the session.
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Free Newsletter: Stalking Stocks with the Shark

Free Newsletter: Stalking Stocks with the Shark

Investors Retreat Ahead of Jobs Report
RevShark - 12.04.08 10:37pm

We’ll have to wait to see how it goes on Friday, but at least we are in a position that we have the chance of making some technical progress as the end of the year starts to approach.
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Free Newsletter: Stalking Stocks with the Shark

Free Newsletter: Stalking Stocks with the Shark

Market Regains More Ground
RevShark - 12.03.08 11:15pm

For the second day in a row, the market was able to shrug off yet more bad news, and buyers aggressively bought each instance of weakness.
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Free Newsletter: Stalking Stocks with the Shark

Free Newsletter: Stalking Stocks with the Shark

Market Kicks Off New Week On A Sour Note
RevShark - 12.02.08 11:06pm

There will be tremendous opportunities that arise from what is, without a doubt, a once in a lifetime market, but that doesn’t mean that we should be rushing to put our capital to work before we see proof that the pricing action has begun to improve.
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Shark Investing Holiday Offer!20 % off

Seasons Greetings Investors,

As a special holiday gift I would like to offer you a 20% discount on our annual Shark Investing subscription. Not only does this represent our biggest savings ever, but it may help with year-end tax deductions if you act now.

The following discounted rates are available until December 30, 2008:

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Click here to subscribe and use the promotion code holidaysavings.

Happy Holidays,

~ James "RevShark" DePorre

No full or prorated refunds. Offer Ends December 30, 2008.

Free Newsletter: Stalking Stocks with the Shark

Free Newsletter: Stalking Stocks with the Shark

Market Kicks Off New Week On A Sour Note
RevShark - 12.02.08 11:06pm

There will be tremendous opportunities that arise from what is, without a doubt, a once in a lifetime market, but that doesn’t mean that we should be rushing to put our capital to work before we see proof that the pricing action has begun to improve.
Read More...

Free Newsletter: Stalking Stocks with the Shark

Free Newsletter: Stalking Stocks with the Shark

Holiday Trading At Its Finest
RevShark - 11.30.08 07:54pm

Investors searching for a perfect example of holiday trading need to no further than Friday’s trading session as the major indices kept climbing higher, continuing what has turned into a decent five-day winning streak for the market.
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Free Newsletter: Stalking Stocks with the Shark

Free Newsletter: Stalking Stocks with the Shark

Citigroup News Helps Extend Oversold Rally
RevShark - 11.24.08 11:29pm

Certainly the notion that what had been the country’s largest bank by market cap needed yet another capital injection suggests that, despite all of their efforts, the government still hasn’t been able to get banks on a more solid footing.
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Free Newsletter: Stalking Stocks with the Shark

Free Newsletter: Stalking Stocks with the Shark

Final Hour Reflexive Rally Takes Market Off Lows
RevShark - 11.23.08 09:04pm

Towards the end of the week, it became very obviously that market players were beginning to expect some sort of forced sale or bailout. As a result, it’s not too surprising to hear talks this weekend about a possible bailout for C.
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Free Newsletter: Stalking Stocks with the Shark

Free Newsletter: Stalking Stocks with the Shark

S&P 500 Moves to Fresh 11 Year Lows
RevShark - 11.20.08 11:49pm

There's plenty of blame to go around, but individual invesotrs need to remain focused on the pricing action.
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Free Newsletter: Stalking Stocks with the Shark

Free Newsletter: Stalking Stocks with the Shark

Stocks Hit Multi-Year Lows
RevShark - 11.19.08 11:58pm

Traditional Wall Street would have us push our precious capital into stocks that are going down, regardless of how ridiculous that idea really sounds when you stop and think about it.
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Free Newsletter: Stalking Stocks with the Shark

Free Newsletter: Stalking Stocks with the Shark

Volatile Session Yields Modest Gains
RevShark - 11.18.08 11:10pm

We suspect that investors can only take so much of the averages threatening to fall to fresh lows before they simply give up and stop fighting the inevitable.
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Free Newsletter: Stalking Stocks with the Shark

Free Newsletter: Stalking Stocks with the Shark

Market At Key Support Levels
RevShark - 11.17.08 08:53pm

Although the both the Dow and the S&P 500 were able to hold both short-term and intermediate lateral support levels, they did so by the skin of their teeth, while the Nasdaq closed at fresh five year lows as another dour day for the market erased what remained of last Thursday’s gains.
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Free Newsletter: Stalking Stocks with the Shark

Free Newsletter: Stalking Stocks with the Shark

Market Gives Back Some Ground
RevShark - 11.16.08 11:19pm

Despite the fact that the major indices limped into the weekend having given back a decent sized chunk of the previous day’s gains, the technical picture remained much improved at the end of Friday’s trading session – even if the action between the bells was not for the faint of heart.
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Free Newsletter: Stalking Stocks with the Shark

Free Newsletter: Stalking Stocks with the Shark

Late Rally Sparks 10% Turnaround
RevShark - 11.13.08 10:53pm

If the bulls had the opportunity to write the script for Thursday’s trading session, we doubt it would be much different than what actually occurred, as the major indices experienced the sort of reflexive rally that has been brewing for more than a week finally kicked in, but only after the indices fell to fresh five-year lows.
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Free Newsletter: Stalking Stocks with the Shark

Free Newsletter: Stalking Stocks with the Shark

More Selling Sned Market Back to October Lows
RevShark - 11.12.08 11:47pm

It was another day of miserable action for the market as the selling pressure that’s persisted now for more than a week sent the Dow and the S&P 500 back to the lows from last month and the Nasdaq to its worst levels in over five years.
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Free Newsletter: Stalking Stocks with the Shark

Free Newsletter: Stalking Stocks with the Shark

Selling Pressures Continue
RevShark - 11.11.08 10:10pm

A late spurt of buying did help the indices close off those lows, but when it was all said and done, they ended the day with losses of 2.14%, on average.
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Free Newsletter: Stalking Stocks with the Shark

Free Newsletter: Stalking Stocks with the Shark

Market Kicks Off New Week With a Loss
RevShark - 11.10.08 11:42pm

Although the major indices were able to hold above last week’s lows, the action between the bells on Monday was far from inspiring.
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Free Newsletter: Stalking Stocks with the Shark

Free Newsletter: Stalking Stocks with the Shark

Oversold Conditions Produce Rebound
RevShark - 11.09.08 08:31pm

We are at least in a position where the averages can put in their first higher low, but up to this point, the market has failed to make any real technical progress over the past few weeks.
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Free Newsletter: Stalking Stocks with the Shark

Free Newsletter: Stalking Stocks with the Shark

Selling Continues For A Second Day
RevShark - 11.06.08 11:18pm

Stocks turned sharply lower on Thursday as the selling pressures which began after last week’s rally on decreasing volume left the market extended and bumping up against overhead resistance continued unabated.
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Free Newsletter: Stalking Stocks with the Shark

Free Newsletter: Stalking Stocks with the Shark

Market Pulls Back After Strong Run
RevShark - 11.05.08 10:20pm

After a week of solid gains which, the market was primed for a pullback, and that’s exactly what we saw during Wednesday’s trading session.
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Free Newsletter: Stalking Stocks with the Shark

Free Newsletter: Stalking Stocks with the Shark

Market Rallies Into Election
RevShark - 11.04.08 10:15pm

The major indices surged higher during Tuesday’s trading sessions as U.S. voters headed to the polls to elect their next President.
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Free Newsletter: Stalking Stocks with the Shark

Free Newsletter: Stalking Stocks with the Shark

Market Takes a Break From Huge Swings
RevShark - 11.03.08 11:01pm

For the first time in what seemed like ages, the market spent its time between the bells in what was, even under “normal” market conditions, a relatively narrow trading range.
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Free Newsletter: Stalking Stocks with the Shark

Free Newsletter: Stalking Stocks with the Shark

Market Closes Out the Week on a High Note
RevShark - 11.02.08 02:48pm

There have been some encouraging technical developments, but even though it does look like the major indices have received some support at recent lows, that’s no reason to go start jumping in willy-nilly.
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Free Newsletter: Stalking Stocks with the Shark

Free Newsletter: Stalking Stocks with the Shark

Random Reversals Yield Solid Gains
RevShark - 10.30.08 10:48pm

Although the action in the final hour wasn't nearly as wild as it had been over the past few days and the trading range was a little bit narrower between the bells, it was another day chock full of reversals and random action.
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Free Newsletter: Stalking Stocks with the Shark

Free Newsletter: Stalking Stocks with the Shark

Late Reversal Erases Post-Fed Gains
RevShark - 10.29.08 11:15pm

We’ve been in a day-trader’s paradise recently, and that’s means it’s been impossible to employ any real money management discipline or build positions with the intent of holding for longer than even the shortest of periods.
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Free Newsletter: Stalking Stocks with the Shark

Free Newsletter: Stalking Stocks with the Shark

Market Posts Massive Gains
RevShark - 10.28.08 11:29pm

It was a day only a bear market could love, as the major indices surged higher by over 10% during Tuesday’s trading session.
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Free Newsletter: Stalking Stocks with the Shark

Free Newsletter: Stalking Stocks with the Shark

Late Selling Ensures Ugly Close
RevShark - 10.28.08 11:12pm

Strength continues to get sold and the bulls can’t even seem to get a decent counter-trend move to last for more than a couple of hours.
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Free Newsletter: Stalking Stocks with the Shark

Free Newsletter: Stalking Stocks with the Shark

Capitulation Interuptus
RevShark - 10.26.08 11:06pm

If there was a bright side to what was otherwise a pretty ugly trading session, then it was that the day wasn’t nearly as bad as would have seemed when market players woke up Friday morning.
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Free Newsletter: Stalking Stocks with the Shark

Free Newsletter: Stalking Stocks with the Shark

Indices Finished Another Wild Session Mixed
RevShark - 10.24.08 01:20am

At the risk of sounding like a broken record, intraday volatility was high again on Thursday as a final hour reversal off the lows of the session allowed the major indices to finish the day in mixed territory.
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Free Newsletter: Stalking Stocks with the Shark

Free Newsletter: Stalking Stocks with the Shark

See-Saw Action Continues
RevShark - 10.21.08 09:59pm

The back and forth action continued on Tuesday as the major indices finished another trading session full of wild swings by giving up most of the previous day’s solid gains.
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Free Newsletter: Stalking Stockswith the Shark

Free Newsletter: Stalking Stockswith the Shark

Averages Post Solid Gains To Kick Off New Week
RevShark - 10.20.08 11:12pm

Under normal circumstances, Monday's gains would be out of the ordinary, but given the 7, 8 and 9% intraday trading ranges which were the norm last week, the action between the bells on Monday was downright sedate.
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Free Newsletter: Stalking Stockswith the Shark

Free Newsletter: Stalking Stockswith the Shark

Indices Finish Lower, But Hold Support
RevShark - 10.19.08 07:17pm

The market finished out the week on Friday with modest losses in what was unsurprisingly another day of wild swings and wide trading ranges.
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Free Newsletter: Stalking Stocks with the Shark

Free Newsletter: Stalking Stocks with the Shark

Market Recovers From Dip Below Recent Lows
RevShark - 10.16.08 10:28pm

Remember that our goal here is to not try to peg an absolute bottom. We need to wait to see stocks actually trend higher before risking the capital we’ve fought so hard to protect.Read More...

Free Newsletter: Stalking Stocks with the Shark

Free Newsletter: Stalking Stocks with the Shark

Dip Buyers Nowhere To Be Found
RevShark - 10.15.08 09:58pm

The problems we are facing are not insurmountable, but the big question is whether or not the action of the past two weeks has effectively priced those problems in.
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Free Newsletter: Stalking Stocks with the Shark

Free Newsletter: Stalking Stocks with the Shark

Market Give Back A Bit Of Its Record Gains
RevShark - 10.14.08 11:48pm

Following Monday’s announcement from 15 eurozone central banks, it was the U.S.’s turn to provide the details of their own strategy to restore confidence to the financial system.
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Free Newsletter: Stalking Stocks with the Shark

Free Newsletter: Stalking Stocks with the Shark

Major Indices Post Record AdvancesRevShark - 10.13.08 10:18pm

The massive reflexive rally that began during the final hour of trading last Friday continued during Monday’s session, as the major indices about half of the previous week’s losses.
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Free Newsletter: Stalking Stocks with the Shark

Free Newsletter: Stalking Stocks with the Shark
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Market Ends Mixed After Late Day Hammer
RevShark - 10.12.08 02:14pm

It was a wild ride on Friday as the major indices recovered from a brutal sell-off at the open to finish in mixed territory, with the Dow seeing a 1,019 point swing as it finished up what turned out to be that index's worst week ever.
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Free Newsletter: Stalking Stocks with the Shark - 10/9/08

Free Newsletter: Stalking Stocks with the Shark - 10/9/08
Brought to you daily by Shark Investing

Market Plunges To Fresh Lows - Again
RevShark - 10.09.08 10:18pm

It was another brutal round of selling on Thursday as a day of mild losses turned into a full-fledged scramble for the exits during the final hour of trading.
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Free Newsletter: Stalking Stocks with the Shark - 10/8/08

Free Newsletter: Stalking Stocks with the Shark - 10/8/08
Brought to you daily by Shark Investing

Late Selling Erases Intraday GainsRevShark - 10.08.08 10:06pm
Although the major indices were heading for what was looking like a decent close on Wednesday, a late sell-off turned a promising day of solid gains into another disappointing trading session.
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Free Newsletter: Stalking Stocks - with the Shark - Fed Measures Fail To Stem Selling - 10/7/08

Free Newsletter: Stalking Stocks - with the Shark - Fed Measures Fail To Stem Selling - 10/7/08

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Greetings Shark Investors:

The market suffered another round of heavy technical damage on Tuesday despite actions from the Fed to improve conditions in the credit market and dovish comments from Chairman Bernanke regarding monetary policy. Although the market took a pretty big hit Monday, a late afternoon bounce allowed the indices to pare about half of their intraday losses into the close, We mentioned that most, if not all, of the buying in the final hour was predicated on the hope that various central banks would deliver a coordinated round of rate cuts in the morning. As such, indications early in the morning were for that buying to continue, but about 90 minutes before the open, the index futures moved quickly back to the unchanged mark after the Fed announced that it had merely updated the schedule for its “Term Auction Facility.” Investors were apparently READ MORE...

Free Newsletter: Stalking Stocks with the Shark - A Real Sense of Fear Kicks In - 10/6/08

Free Newsletter: Stalking Stocks with the Shark - A Real Sense of Fear Kicks In - 10/6/08

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Greetings Shark Investors:

In our last Stalking Stocks evening review we said that last Friday’s ugly employment report and disappointing reaction to the passage of the bailout bill suggested that ordinary investors might being to wonder over the weekend if it might not be too late to sell. Apparently, the answer was “no,” as the market lost significant ground on Monday, despite a late day bounce into the close. Following last week’s break to fresh multi-year lows and sharp losses in overseas markets, indications were for a gap lower at the open as we kicked off the new week. Sentiment was downbeat from the get-go as credit conditions failed to ease in overnight trading, Germany moved to guarantee personal savings deposits and European governments failed to produce a consolidation package similar to the TARP.

As such, it was a sea of red once the market opened as investors fled to the safety of treasuries and gold, while the broader market started the day well into the red. After the opening bell, the indices spent the better part of the morning moving steadily lower, with the 10,000 level on the Dow providing only momentary support along the way. Although the market was able to recover a bit of their early losses after both the Dow and the S&P 500 fell under the lowest levels from 2004, the relentless selling pressure mounted again as we worked our way through the New York lunch hour and into the early afternoon.

The morning lows provided a bit of support mid-afternoon, but about two hours before the close that level finally failed as the averages moved to what would turn out to be the lows of the session with the Dow, Nasdaq and S&P 500 showing average losses of a whopping 8.67%. However, about an hour before the close, speculation that various central banks might announce a coordinated rate cut triggered a spurt of buying that lasted tight into the close, allowing the market to pare about half of its losses when all was said and done.

Still, despite the fact that we were able to close well off the lows of the session, there’s no getting around the fact that it was a very ugly day for the market. . The major indices finished with losses of 4.32% on average, closing just above the lowest levels in four years on the heaviest volume we’ve seen in over two weeks and breadth that showed about 13 losing stocks for every one that gained. We’ve been talking a lot recently about how, while the losses we’ve seen over the past several trading sessions are painful, the market is finally starting to do the necessary and messy work of pricing in the consequences from the collapse of the housing market.

The interesting thing, however, was the absolute silence of the serial bottom callers who, as the market fell under key support levels repeatedly over the past year, have urged investors to hurry up and buy lest they miss out on the resumption of the bull market they refused to admit was over. Despite the late bounce, there was a real sense of fear out there today and we finally saw some actual capitulation as investors sold down their positions regardless of the price they had to accept to do so. We’re not saying that we are on the cusp of a meaningful turn, but we’re starting to get to the point where the negativity is so pervasive that we can start thinking about our plans of attack when we do start seeing some real signs of strength.

In the immediate-term, however, the market has become quite oversold, increasing the changes that we will see some sort of reflexive move to the upside. Those with appropriate time-frames may find some quick trades to the upside, but with so many market players feeling trapped right now, the likelihood is that any action to the upside will be met with sellers looking for a way out.

Free Newsletter: Stalking Stocks with the Shark - Market Drops to New Lows - 10/5/08

Free Newsletter: Stalking Stocks with the Shark - Market Drops to New Lows - 10/5/08

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Greetings Shark Investors:

After spending the better part of the day in positive territory as investors waited for the House of Representatives to vote on the bailout bill, the market sold off sharply in the afternoon in what was a classic example of a “sell-the-news” reaction, finishing at its worst levels in four years. Following the previous day’s steep losses, indications were for a higher start to the day as, once again, traders were positioning themselves ahead of what they expected to be a successful vote on the $700 billion plan to buy impaired assets from banks and later auction them off. Indeed, the notion that all eyes were once again focused squarely on Capitol Hill was born out after the index futures actually gained ground following another very ugly employment report which showed a larger than expected decline of 157K jobs last month, versus consensus estimates of negative 105K.

As such, the market opened the day well into positive territory, climbing steadily for most of the morning, with each major S&P sector sporting gains – especially materials and energy, which saw big technical bounces after lagging the broader market by a significant margin over the past several days. Although the broader market began to trend lower and lose a bit of steam as we worked our way though the New York lunch hour, it moved quickly to what would turn out the best the best levels of the day once the afternoon got under way as it became clearer that lawmakers had the votes needed to pass the bill.

Although the hour was getting late, the House finally got around to casting their ballots, passing the bill into law by a decent margin. But, just as soon the voting ended, the market began to fall quickly back towards the unchanged mark as some market players unwound the bets they had made ahead of the news while others sold into what was obviously not a positive reaction. The market spent the next couple of hours whipsawing around, but a vigorous wave of selling kicked in about 30 minutes before the close, causing the market to finish at the lows of the session with losses, on average, of 1.44% on breadth that was worse than 2:1 to the negative and heavy volume that accelerated into the close.

Huge volatility lately has left investors badly shaken and displaying a high degree of uncertainty as signs of economic weakness keep popping up and tight credit market conditions simply refuse to budge. We’ve been saying for the past couple of weeks that, even if we accept the argument that the bailout package was necessary to avoid a massive financial meltdown, that doesn’t mean that all of our problems would be solved. The problem now, however, is that with a move to a fresh multi-year low following the passage of something that is supposed to save Wall Street and yet another dismal jobs report, there will almost certainly be plenty of folks who look at their accounts over the weekend and wonder if maybe it isn’t too late to sell.

The main issue remains the credit market, but even if we can overcome that hurdle in the near-term, we still have a slowing economy to deal with, fallout from a weak labor market, and a badly shaken U.S. consumer. It is just simply naïve to think that, with one stroke of the pen, then government will be able to fix that. Meanwhile, from a market perspective, investors are badly shaken, and there are plenty who are looking for a way to make a more graceful exit from a situation that is much worse than many had realized.

At some point down the road, we will reach a point where bad news fails to garner a negative response and the averages begin to make a series of higher highs and lows, taking out important resistance levels on volume along the way. Perhaps all of these factors have set us up for the sort of capitulatory event that will allow this market to put in a more tradable low, but for now however, there’s just no point whatsoever in trying to throw capital into a market that is clearly trending lower.

Free Newsletter: Stalking Stocks with the Shark - Indices Close Just Above Monday's Lows - 10/2/08

Free Newsletter: Stalking Stocks with the Shark - Indices Close Just Above Monday's Lows - 10/2/08

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Greetings Shark Investors:

Although the Senate passed their own version of a bailout bill, the market failed to respond to the news, and instead, finished sharply lower in what was by any measure a very ugly trading session. While the hope has generally been that once this piece of legislation was passed, credit markets would unfreeze and we could get back to a more normal environment, but instead, indications were for a soft open early in the morning. However, the index futures deteriorated as we head towards opening bell, accelerating to the downside after the weekly jobless claim climbed to 497K, well beyond the 475K that had been expected.

As such, the indices started the day sharply lower and spent the first 90 minutes of the day moving straight down. The selling was able to stabilize ahead of the New York lunch hour, but even though the market hovered near the lows of the session for the next couple of hours, it resumed its relentless march lower early in the afternoon, moving steadily lower for the rest of the day. By the close, the indices lost, on average, 3.9% on heavy volume and breadth that was right at 5:1 to the negative.

So why the weakness today? A couple of weeks ago, when the Treasury proposed an RTC-type solution to the bad debt problems, we said that, while such a strong measure might be necessary, it ultimately meant that the public had been made aware of how bad the problem we are facing really is. Since then, continuing deterioration in credit conditions and the economic data indicates that we are heading for a global slowdown which is worse than many had been expecting. The point is that the market seems to be shifting its focus away from Capitol Hill and back to earnings, the economy, and growth. Of course, the outlook for those things may not be positive, but at least it looks like we are doing the very important work of discounting the problems that have resulted from the meltdown in the housing market.

Yes, the action was very ugly on Thursday, but the thing that we, as individual investors, need to remember is that this is the very sort of action that will finally allow this market to make the necessary progress so that we can eventually start to build a more sustainable bottom. We've got the monthly employment report to contend with on Friday, and given the fact that the least two reports were much worse than expected, we suspect that another disappointing report will finally convince folks that we are facing a serious recession.

At some point, this pricing action will show obvious improvement, and we'll be able to start buying stocks again, but until then, we need to keep our capital is safe and stay out of the way of this very nasty bear market.

Free Newsletter: Stalking Stocks with the Shark - Choppy Session Yields Modest Losses - 10/1/08

Free Newsletter: Stalking Stocks with the Shark - Choppy Session Yields Modest Losses - 10/1/08

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Greetings Shark Investors:

Although the action between the bells was downright comatose when compared to what we saw over the past two days, by any normal measure, Wednesday’s trading session proved to be quite choppy. While news outlets were reporting that the Senate was planning on voting on their own version of a bailout bill later in the evening and many were likely relieved that, after spiking to nearly 7% the night before, Libor rates fell back to a more manageable, but still elevated level around 3.8%, indications were for sizable losses in the major indices following the previous day’s big gains.

Given the volatility and headline-driven nature of the market recently, it’s hard to blame market players for taking some quick profits or making a more graceful exit, but even though the market began the day with losses of just under 1%, they were able to hold those initial lows as the day got under way. However, stocks took a steep dive following the monthly reading on the ISM manufacturing index came in at 43.5, well below expectations of 49.5. Any reading below 50 indicates a contraction. Still, the selling pressures following that news failed to accelerate, and about an hour later, the market began to move higher as it became clearer that the Senate would likely pass their bailout bill and rumor began to spread that Europe was planning on a similar measure.

After briefly moving into positive territory, however, the indices dropped once again as the rumors of a European bailout measure were denied. But even that downward move proved to be short-lived after news broke about two hours before the close that Warren Buffet had stuck a deal with GE that was very similar to the one he brokered with GS a couple of weeks ago. According to the terms of the agreement, Mr. Buffet will be getting $3 billion in perpetual preferred yielding 10% as well as warrants to buy $3 billion in common stock at a strike price of $22.25.

Still, despite a great deal of gushing by the financial media about how this move by such an esteemed investor must mean that GE is an outstanding value at these levels, the thing to keep in mind is that the deal essentially means that Mr. Buffet is making a sizable loan which pays very nicely, with the possibility of reaping huge profits should the stock price move higher.

Regardless, the indices proved unable to move to fresh session highs or make a concerted effort to turn into positive territory, and instead chopped around for the remainder of the day, finally closing with modest losses of 0.45%, on average.

As we write, the Senate has passed their bailout bill, but we’ll have to wait and see if it is passes in the House of Representatives. At this point, the whole rigmarole surrounding what has turned into a political mess is starting to wear on many investors’ nerves. With the volatility that has resulted from such a headline-dependant environment, it’s no wonder why so many are finding it difficult to have much confidence – especially after the nasty surprise we got Monday afternoon.

However, the thing we, as individual investors need to keep in mind is that, as frustrating as it is to not be able to build positions in this market, we need to stay focused on protecting our capital. It is highly unlikely that we will wake up tomorrow and find ourselves left behind by a raging bear market, and if we can remain patient and wait for the pricing action to come to us, then we will be in a terrific position to profit when conditions do actually improve.

Free Newsletter: Stalking Stocks with the Shark - Market Regains Some Ground - 9/30/2008

Free Newsletter: Stalking Stocks with the Shark - Market Regains Some Ground - 9/30/2008

Greetings Shark Investors:

After an average fall of over 8%, the major indices were able to recoup a large chunk of the ground it lost on as hopes grew that a revised bailout package would pass later in the week, extremely tight credit markets eased a tad, and some good old-fashioned reflexive buying kicked in during Tuesday’s trading session. Following the previous day’s absolute drubbing, overnight measures of credit conditions were showing signs of increased distress as the fed funds rate spiked to 7% and LIBOR jumped to 6.88%, but word that Congress was working on a second version of the Paulson package helped to push index futures higher as we headed towards the open.

As such, the major indices began the session trading sharply higher, but after working their way higher for the first hour or so, spent the next three hours chopping around near their early highs in a fairly tight trading range. However, as stocks spent the early part of the day climbing, signs that the recent flight to safety began to ease started to pop up as treasury prices fell and the TED spread pulled back from an early high of over 3.5%. Meanwhile, oil prices rebounded strongly despite strength in the U.S. dollar on the heels more signs of troubles in Europe after Dexia, a Belgian bank, had to be bailed out.

Despite that sideways action, the major indices began to hit fresh intraday highs as the afternoon got under way, spending the rest of the day making steady progress to the upside. By the close, the indices were sporting gains of 4.97%, on average, on breadth that was right at 2:1 to the positive and volume that, while lighter than Monday, was still better than what we’ve seen over the previous week.

As we were last week, we are left to deal with a market that is focused primarily on Washington and traders who are trying to position themselves in front of what they expect to be a rally if Congress can pass a bailout bill this time around. Certainly, a 5% gain on decent breadth and volume is nothing to scoff at, even if it came a day after the market lost almost double that the day before, but the fact remains that we are in a spot where charts and fundamentals don’t matter right now, and instead, we are held hostage by political wrangling, sound-bites, and headlines. The question, of course, is: how do we navigate our way though this mess? Right now, trading this market is all about understanding and gauging psychology. Emotions always rule the action, but they are playing a bigger role than normal at this juncture.

As such, it is increasingly important for individual investors to make sure that their time-frames are clearly defined. Those with the shortest of time-frames can certainly find quick trades in this extremely volatile environment, but given the news-driven nature of this market right now as well as the tenuous credit conditions, the risks are very high. Those looking to build longer-term positions would probably be better served right now by simply standing aside. The best case scenario right now is that we are starting to see the beginnings of a bottoming process, but even if that’s the case, it’ going to take a while for that to play out. These is certainly not a technical environment to trust, and we are far from having conditions that support more substantive buying.

Free Newsletter: Stalking Stocks with the Shark - House Rejects Bailout Bill - 9/29/08

Free Newsletter: Stalking Stocks with the Shark - House Rejects Bailout Bill - 9/29/08

Greetings Shark Investors:

In our last Stalking Stocks evening review, we said that, while there was little doubt that the market was set up for a textbook example of a “sell-the-news” reaction should the bailout bill be passed, the question was the extent to which the market had priced in its expectations for a reflexive rally. Given the early action, the answer is “pretty well”, but few, if any, were able to anticipate what would come later in the day. Despite the hopes for a bounce after Congressional leaders announced over the weekend that the House would vote on the bailout bill on Monday, indications were for a lower start to the day. Not only had that news failed to improve the very tight credit conditions, but other signs of continued financial turmoil weighed on early sentiment. In Europe, Fortis (a major Dutch / Belgian bank) was bailed out by Belgium, the Netherlands and Luxembourg, Hypo (Germany’s second largest commercial lender) had to be rescued by the German government, and Bradford & Bingley (a mortgage lender in the U.K.) was nationalized. Meanwhile, WB was in the process of heading towards zero after it was forced into selling itself to whatever bidder would make an offer.

We’ll never know what part of the gap lower at the open was driven by all of the morning’s news, what part by the fact that the TED spread had spiked to almost 3.5%, and what part by the lack of investors who were left to buy after the bailout announcement had been made, but after opening the day well into the red, the major indices spent their first 30 minutes of the trading session in an uninterrupted move to the downside.

That early bout of selling was able to abate as the morning developed and the Fed announced that they, along with other central banks around the world, would pump more liquidity into the financial system in order to loosen up the very tight credit conditions. From that point on, the market was able to chop around in a relatively loose lateral channel for the next four hours as investors waited for the House to vote on the bailout proposal, but instead of passing the bill by the wide margin the bill’s sponsors had expected, the House actually rejected the bill with a vote of 205 for, 228 against. Once it became apparent that the votes wouldn’t be there, the market plunged to deep losses on the session. For the rest of the day, the indices jerked around in a manner reminiscent of an erratic EKG reading before finally settling the day barely off the lows of the session with losses, on average, of 8.31%.

Certainly, this is one of the biggest one-day drops that this market has had to deal with in a very long time, and it will go a long ways in frightening investors who, up until a little over a week ago, may have had little idea as to how deep and wide the problems we’ve been contending with are. Unfortunately, instead of a stable market and confident investors, it seems as if all we’ve been left with is more uncertainty. Still, as we’ve been saying, there’s little reason to believe that conditions in the broader economy would have improved all that much had the bill been passed, and that the rally almost undoubtedly been sold hard sooner rather than later.

Regardless, that doesn’t make a day of such severe losses any easier to swallow, but the good news is that this is the sort of steps this market needs to take in order to put in a real bottom. It will take a while, but there’s no reason to think that we will be able to put in a more meaningful low until the marginal holders, who have either been ignoring their accounts of have been hoping for the market to bail them out, are shaken out. Unfortunately, it’s often day like today which help to do the shaking.

Of course, the big question is: where do we go from here? The likelihood is that Congress will begin work on another bill, and while there will almost certainly be some short-term opportunities for quick trades as we move forward, it is essential that individual investors continue to ignore the so-called market experts who tell us that it’s time to start buying hand over fist. At some point, they will get their bottom-calling right, but so far, they’re batting .000, and there’s no reason to think that they’re going on a hitting streak any time soon. There will be tremendous chances to make lots of money down the road, but those who are able to protect their capital in all of this mess will be the ones who profit the most.

Free Newsletter: Stalking Stocks with the Shark - House Expects To See Bill Monday - 9/28/08

Free Newsletter: Stalking Stocks with the Shark - House Expects To See Bill Monday - 9/28/08

Greetings Shark Investors:

If there was any doubt that the previous day’s gains had been predicated on a hope that Congress would agree on plans to bail out the financial sector, then the proof was in the pudding on Friday as the market sold off early on news that negotiations had hit a roadblock but came back late in the day after legislators indicated that they would hammer out an agreement over the weekend. As we said in our last Stalking Stocks evening review, despite a slew of disappointing news, investors pushed stocks higher, hoping to be in position for a possible rally should a bailout package be announced, so when word got out that discussions over the details of the plan had derailed progress towards an agreement, it was little surprise that indications were for a lower start to Friday’s session. Also weighing on sentiment early on was a very poor reaction to RIMM’s earnings miss and news that federal regulators had moved to seize WM and sell off its assets and deposits to JPM. Still, despite the fact that the market had just witnessed the largest bank failure ever, all eyes remained focused Washington.

As such, the major indices opened the day sharply lower, but right from the start, they began to pare their initial losses, moving higher over the first ninety minutes. Although each of the averages began to lose some of that momentum as the morning wound down, word was that Congressional Republicans were coming back to the negotiation table, thus sparking hope that something might be able to be done over the weekend.

As we worked our way into the New York lunch hour, buyers were on the move again, pushing just about the entire market straight up as we headed into the afternoon, but even though the averages began to struggle a bit later, a surge of buying that began a little less than an hour before the close lasted right into the close on no apparent catalyst other than a desire on the part of market players to be in a position to be in front of a rally Monday morning as it became clear that legislators were intent on announcing some sort plan over the weekend. By the close, the indices were in mixed territory, but well off their initial lows and at the highs of the session.

So, in the end, we were once again faced with a market that was clearly expecting the government to announce a bailout of the financial sector, hoping that the news would spark a relief rally. Late Sunday evening, indications are that a bill would be introduced in front of the House on Monday, but as we’ve pointed out previously, given the buying ahead of the news, the big question is how much of whatever potential move may be in store has already been priced in. Moreover, even though we will never know, there are a bunch of folks who were short the financials, and they aren’t around right now to be squeezed. Thus, it will be interesting to see how much vigor any relief rally, if it occurs, has.

Regardless, not only are we in the midst of a market that continues to be filled with uncertainty, but we are also witnessing a textbook set-up for a “sell-the-news” reaction. Moreover, even if any move does have some legs to the upside, there’s some heavy overhead resistance looming nearby, and that will provide yet another major hurdle.

The bottom line is that, despite all of this political yammering and election year wrangling, we are still looking at a credit market where banks are clearly unwilling to lend to each other and an economy that is still not showing any signs of improvement. We are still in a bear market, and that’s not going to suddenly change overnight. But at least if we can get this whole bailout rigmarole behind us, then maybe we can get back to a more normal trading environment.

Free Newsletter: Stalking Stocks with the Shark - Investors Jostle For Position - 9/25/08

Free Newsletter: Stalking Stocks with the Shark - Investors Jostle For Position - 9/25/08

Greetings Shark Investors:

The major indices were able to finish Thursday’s trading session with solid gains as investors looked past a slew of disappointing economic data and a troubling earnings warning and instead focused on positioning themselves for a possible rally should Congress pass the proposed bailout package. Indications were for a higher to the day, but despite the upbeat sentiment, the news in the morning was not at all encouraging. Still, despite news that GE had cut it third quarter and full-year guidance due to the turmoil in the financial services industry, that the weekly jobless claims number came in much higher than had been expected, and that the August durable goods orders report was well below estimates, that new information did little to derail the upbeat mood.

As such, the market opened the day well into positive territory, and for the first time this week, strength in the index futures was actually followed by more action to the upside after the open. Following a steep early ascent which lasted for almost an hour, the speed with which the market moved higher slowed, but prices continued to trend steadily higher for the rest of the morning and into the early afternoon.

The action got a little choppy as the day began to wind down, but even though the indices were unable to recover fully from a spurt of selling in the final hour, they did close with gains of 1.74%, on average, with each of the major S&P sectors well into positive territory, save materials, which once again showed relative weakness all day long. Certainly, it was a welcomed sight to see a little green on the screens after such a poor week of action, but there’s little doubt that investors were simply trying to jostle for exposure ahead of what many expect to be an imminent passage of legislation related to Treasury’s plan to buy distressed mortgage-back assets from financial institutions and auction the off at a later date.

However, as we’ve argued on several occasions, even if such action is necessary to avert a very ugly financial meltdown (and given the continuing tightness in the credit market, there’s plenty of doubt that the proposal will do much of anything to get banks to be more willing to lend to each other), there’s no reason to think that it will be the end to this bear market. In fact, the great likelihood is that once the bills passes, we will see a classic “sell-the-news” reaction. The question, of course, is if we’ve already seen all the action to the upside ahead of the news, or if we have some more room to move higher before the ensuing pullback. However, regardless of the short-term direction, which should yield some quick trading opportunities for the nimble of finger, but there’s little reason to believe that we are going to have clear skies from here on out.

The fact is that there are still some big issues the market has to deal with, and as Steve Liesman on CNBC pointed out ahead of the bell, you don’t have a credit event such as this one without some very real effects on the economy – a point that was backed up in a rather timely fashion by the data in the morning.

While individual investors with very short time-frames and plenty of dry powder may find some quick trades in the near-term, longer-term, by far, the number one goal right now should be capital preservation, and those that protect their hard earned money will be in a good position to profit once conditions finally improve.

Free Newsletter: Stalking Stocks with the Shark - Warren Goes Shopping - 9/24/2008

Free Newsletter: Stalking Stocks with the Shark - Warren Goes Shopping - 9/24/2008

Greetings Shark Investors:

Although the action died down considerably on Wednesday, it was ultimately another disappointing trading session as some positive news after the previous day’s close failed to generate any sustained action to the upside. Early indications were for a solid start to the day after an announcement last night that Warren Buffet had struck a deal with GS whereby he would get $5 billion in preferred stock which will yield 10% in perpetuity and is callable at any time. Moreover, he is also getting warrants that will allow him to buy $5 billion in GS common stock at any time over the next five years at a strike price of $115.

Still, even though we came into Wednesday’s trading session with oversold conditions following the losses earlier in the week, the upbeat sentiment ahead of the bell failed to translate into large gains at the open. Instead, while the indices did begin to trading session in positive territory, they quickly fell back into mixed territory as the day got under way. However, unlike the past several trading sessions, the action between the bells proved to be quite lackluster, as the averages spent the entire session hovering near the unchanged mark.

Meanwhile, the proposed bailout plan continued to be in focus as Treasury Secretary Paulson and Fed Chairman Bernanke testified before the House Financial Services Committee. Unfortunately, the details of the plan are still unclear, which likely further exacerbated the already uncertain tone during the day. As the session came to a end, it was looking like we were going to suffer another poor close, but a last minute spurt of buying just before the final bell left the indices in mixed territory and essentially unchanged on the day.

Certainly, the notion that someone of Mr. Buffet’s stature is finding value in certain areas of the market is a positive, but the fact that the market was unable to generate any sustained action to the upside is worth noting. The fact is that, not only has the SEC’s ban on short-selling certain stocks likely affected the way in which investors operate, but we seem to be stuck while the market tries to figure out the effects of any possible legislation.

We’ve pointed out that the recent efforts to shore up investor confidence may be necessary, but the only thing that has happened so far is that market players and the general public finally got wind of how bad things actually are. Given those revelations and the chaotic nature of the price moves recently, we do see how investors will be anxious to jump in with both feet right now. Simply, there seems to be some real uncertainty out there right now and general skepticism that any action the government may take will do that much to improve the broader economy.

The bottom line is that dealing with the market is getting more and more difficult, but as we have often said, it will only be when no one wants anything whatsoever to do with equities that we can even begin to think about the possibility of a sustainable bottom. We’re starting to see some of that despair beginning to take hold, but it’s going to take a while for all of this to play out. As such, individual investors continue to be best served by simply staying patient and not trying to force trades on an uncooperative market. Better days will come, and those who can refrain from fighting the primary trend will be in a tremendous position to profit when conditions improve.

Free Newsletter: Stalking Stocks with the Shark - Choppy Trades Yields Poor Results - 9/23/08

Free Newsletter: Stalking Stocks with the Shark - Choppy Trades Yields Poor Results - 9/23/08

Greetings Shark Investors:

Although the action certainly wasn’t as frenetic as it has been over the past several days, the major indices lost more ground on Tuesday in what turned out to be a rather choppy trading session. Outside of some downgrades for a handful of big banks, the news wires were relatively quiet as we headed towards the opening bell. However, early indications were for a somewhat lower start to the day as the market waited for Treasury Secretary Paulson, Fed Chairman Bernanke, SEC Chairman Cox, and OFHEO Director Lockhart to testify in front of the Senate Banking Committee regarding current conditions in the financial markets.

Despite the early softness, though, index futures improved as we headed towards the opening bell, prompting a positive start to the day. As trading got under way, the major indices were able to sport decent gains, with materials being the only major S&P sectors to show a loss. Recall on Monday that, with the dollar tanking and the October contract closing around $120 after hitting $130 during the day, many of the weak-dollar plays which acted so well earlier this year were attracting a lot of attention. However, with the dollar bouncing back and oil back down under $109 in the morning as the November contract started trading, it was not too surprising to see some quick reversals in areas such as metals, mining, agriculture and solar.

Despite the decent open however, the market spent the rest of the morning bouncing around between gains of about 1% and the unchanged mark, but as the morning wore on, each trip to the flat-line was followed by subsequently weaker and weaker bounces. While the action during the morning was by no means poor, many traders also took note of the fact that the reaction to what was being said in front of the Senate Banking Committee was far from euphoric, in turn suggesting that plenty of market players are skeptical that all of the government’s proposals, even if they may be absolutely necessary, won’t automatically guarantee a new uptrend.

Although there was no apparent catalyst, stocks abruptly headed south just after the New York lunch hour got under way, but after taking a quick trip to negative territory, stocks turned right back up, moving back towards the flat-line as the final bell approached. Unfortunately for the bulls, however, the market reversed course once again as the indices moved right back down to the worst levels of the day, closing with losses, on average, of 1.4%. Strange as it may sound, the magnitude of the day’s move is nowhere close to what we’ve become used to recently, but the market ended up closing out another trading session with an ugly close.

As frustrating as this dismal action is getting, however, the one thing that individual investors need to keep in mind is that these are the very steps that this market needs to take in order to finally start making progress towards an eventual low. It isn’t pretty, and it’s certainly painful for those who have been holding on to the hope for a quick end to all of this turmoil, but the simple fact is that all of the counter-trend bounces and bailout rallies we’ve seen over the past year have only prevented this market from pricing in the consequences of the meltdown in the housing and credit markets.

Normally, we’d say that the speed and severity of the recent losses has set this market up for a reflexive move to the upside, but as difficult as timing such moves is normally, it’s going to be even trickier with the SEC’s ban on shorting an ever-growing list of companies. Still, even though he rules may have been changed, the fact that we are in a bear market hasn’t, and until we see signs of real improvement, capital preservation needs to be our number one goal.

Free Newsletter: Stalking Stocks with the Shark - Consequences Begin To Kick In - 9/22/08

Free Newsletter: Stalking Stocks with the Shark - Consequences Begin To Kick In - 9/22/08

Greetings Shark Investors:

Although volume died down considerably, the action between the bells was as crazy as ever on Monday as the major indices kicked off the new week by giving back the lion’s share of Friday’s gains. Following the previous two days’ surge, the news wires were once again filled with developments for investors to consider early in the morning. First was an announcement that the last two major Wall Street investment banks, GS and MS, had applied to convert themselves into commercial bank holding companies, and that the Treasury had been talking about expanding its plans to buy mortgage-related debt to include other impaired collateralized debt obligations. Also affecting sentiment early on was news that the SEC had added another 50 names to its list of banned shorts. But, probably the most noteworthy aspect to the action ahead of the bell was an absolute drubbing for the U.S. dollar as concerns began to mount over how the government would pay for all its proposed bailouts.

As such, the market opened the day well into negative territory. We mentioned in out last Stalking Stocks evening review, that while the government’s efforts to shore up investor confidence and prevent a developing run on money market funds may have staved off a dire financial crisis, their actions would likely carry some unintended consequences. Markets that are under pressure will often receive support on the way down by shorts who buy into weakness. So, as the day got under way and financials were at the receiving end of most of the early selling pressure, it is highly likely that the downward pressure mounted as there were simply no short sellers to book their profits.

Meanwhile, the weakness in the greenback also triggered huge price spikes in oil, gold and other commodities, which in turn put pressure on consumer discretionary and technology stocks. The net result was a market that spent the entire morning moving steadily lower. While the averages were able to stabilize as the afternoon got under way and pare a small portion of their losses, a fresh wave of selling kicked in as the final hour got under way, causing the indices to close at the lows of the session with losses, on average, of 3.75%. Meanwhile, even though volume was the lightest since the end of August, the selling was broad-based as each of the major S&P sectors finished well into the red on breadth that was 22:6 to the negative.

We also mentioned previously that massive bailout plans and emergency trading restrictions are by no means signs of strength, and that our job at this point as individual investors is to determine how we are going to deal with all of this turmoil. Certainly, the spike in the weak-dollar plays which dominated the action earlier this year is providing short-term traders some quick opportunities, but have we really reached a point where it’s safe to start putting our capital to work in a substantive manner?

We’ve been steadfast in arguing that the market will tell us when it’s time to put our precious capital back to work. Clear demand, big volume, strong, broad-based price surges and technical improvement are signs of a healthy market, and we have yet to see any of those things. Remember, there’s no hard and fast rules about having to participate in a market that is in a clear state of flux, and in fact, the best thing individual investors might consider is the merit of standing aside while all of this mess sorts itself out.

RevShark's Market Update 9-22-08

Free Newsletter: Stalking Stocks with the Shark - Market Surges On Government Actions - 9/21/08

Free Newsletter: Stalking Stocks with the Shark - Market Surges On Government Actions - 9/21/08

Greetings Shark Investors:

There are plenty of hyperbolic words and phrases – such as “tumultuous”, “historic”, “unprecedented” and “brink of financial disaster” – being bandied about regarding the events to close out the week, but there’s no denying that the major indices were able to end Friday’s trading session with big gains after the government took action on several fronts in order to shore up confidence in the financial markets. Following the previous day’s massive late afternoon rally on the heels of various reports about the possibility of a Resolution Trust Corp.-type solution to the mortgage-related debt crisis, indications were for a much higher start to the day as investors reacted to numerous announcements from the SEC and the Treasury Department.

First was the confirmation that the government would initiate a plan to buy mortgage-backed securities and later auction them off in the open market. Meanwhile, the SEC put an immediate stop to short selling in a list of 799 financial stocks and also amended rules related to when and how companies could purchase their own shares. Additionally, and perhaps most importantly, the Treasury Department said that it would back certain money market assets. Over the past several days, anxiety over a potential run on money market funds has been building after news of a handful of large funds “breaking the buck” sent many investors on a mad dash for the safety of gold and treasuries.

So, even though a large part of the ensuing gap was undoubtedly fueled by a huge dose of short-covering, there’s little denying there was a large degree of relief out there as well. After the fireworks of the morning, though, the action calmed down considerably for the rest of the day. After the market gave up some of its initial gains as investors locked in some quick profits, the indices spent the remainder of the day hovering well into positive territory, sporting gains of between about 2% and 4%. By the close, each of the major indices was able to finish higher by 3.6%, on average, on breadth that was just under 5:1 to the positive and heavy volume.

Certainly, there are few who don’t have their own opinions about the actions the government has taken over the past week, and we’ll probably never know if we were on the verge of an honest to goodness financial meltdown. But, outside of the socio-economic implications of this past week’s events, our job as individual investors is to figure out how we should react moving forward.

While some degree of uncertainty has been removed from the market, but there’s also little doubt that the government’s actions will have some unintended consequences. In the end, however, the market will be the final arbiter, and the first thing we need to be watching for is signs that investors are starting to buying with confidence again. Not the sort of run-to-the –safety-of-commodities sort of confidence we saw earlier this year, or the jump-on-financials-because-everyone’s-covering-shorts type action we saw a couple of months ago. Rather, we need to see some real honest-to-goodness buying as we work our way into what is seasonally the strongest part of the year.

The bottom line is that the action over the past week has made an absolute mess of the charts, but if conditions really do start to improve from here, then we should be seeing some better set-ups as we move forward.

Free Newsletter: Stalking Stocks with the Shark - Alphabet Soup Thickens - 9/18/08

Free Newsletter: Stalking Stocks with the Shark - Alphabet Soup Thickens - 9/18/08

Greetings Shark Investors:

Although the major indices were able to recoup almost all of the previous day’s losses on Thursday, the action between the bells produced some of the fastest and largest swings we’ve seen all year. Early morning indications were for a higher start to the day, but despite the media’s best efforts to attribute an upbeat mood to efforts by central banks around the world to pump liquidity into the financial system, reports that MS was in merger talks with WB, and that WM was actively trying to find a suitor, the simple fact is that the massive losses over the past few days had created conditions ripe for some reflexive action to the upside.

As such, the market opened the day by posting solid gains, but conditions deteriorated rapidly as the morning got under way. Financials once again took center stage as sellers hit several asset management firms hard and concerns mounted over the heath of money market funds. Specifically, the Putnam Money Market Fund was forced to close following large redemption requests, a move which comes just days after The Reserve Primary Fund “broke the buck”.

Thus, the major indices, which had started the day sporting solid gains of around 2%, steadily lost ground throughout the morning and into the New York lunch hour, reaching what would turn out to be the worst levels of the day at more than 1% below the flat-line just as we entered the afternoon. However, the market was able to make a concerted surge back towards the unchanged mark shortly thereafter following news that the United Kingdom’s Financial Services Authority had temporarily banned short sales of financial stocks.

After that spike, the market was able to hover in positive territory with modest gains for about an hour, but reports from various news outlets that the government might be contemplating a Resolution Trust Corporation-type solution to the current mortgage-related debt crisis triggered a massive wave of buying (and likely short-covering) that sent just about the entire market rocketing higher.

By the end of the day, the major indices were able to close with average gains of 4.23% on tremendous volume and breadth that was just shy of 3:1 to the positive.

Without a doubt, the action on Thursday was remarkable volatile, and those who tried to navigate their way through the wild swings likely suffered a severe case of whiplash. There’s no question that the hopes for a once-and-for-all solution to the issue of all the bad debt that financial institutions continue to hold will get the serial bottom-callers in a tizzy as they tell individual investors that the coast is clear. However, whether or not today’s events have marked some sort of bottom, trying to get some sort of edge in a market that is so news-dependent and emotion-driven is all but impossible.

The bottom line is that those who have been able to remain defensive throughout this whole mess will be in terrific shape to profit once conditions improve. If we can get some follow-through to the upside, then that should translate into better chart set-ups. Today was a step in the right direction, but no matter how hard we may try, there’s just no way we’re going to be able to speed any kind of recovery along.

Introduction to Shark Investing Attributes

Free Newsletter: Stalking Stocks with the Shark - Market Hits Fresh Multi-Year Lows - 9/17/08

Free Newsletter: Stalking Stocks with the Shark - Market Hits Fresh Multi-Year Lows - 9/17/08

Greetings Shark Investors:

The major indices posted solid losses, finishing at the lows of the day in what was another tumultuous trading session on Wednesday. Despite investors’ obvious enthusiasm over a possible government bailout of AIG late in the afternoon on the previous day, the announcement of an $85 billion loan to the troubled insurer failed to translate into a better mood early in the morning. Instead, global markets seemed more concerned of the possibility of further failures of large financial institutions and a credit market that has begun to freeze up once again. Despite the efforts of central banks around the world to pump liquidity into the financial system, the Wall Street Journal reported that, on Tuesday, “banks abruptly stopped lending to each other or charged exorbitantly high rates….”

As such, the averages started the day modestly lower, but unlike the previous two trading sessions when larger gaps to the downside presented dip buyers with an opportunity to try and catch a reflexive bounce, investors were completely uninterested in buying the opening weakness. While the market was able to hold above those initial lows for the first few minutes of the day, sellers didn’t wait long before going to work, pushing the averages sharply lower for the rest of the morning. With breadth approaching 9:1 to the negative and each major S&P sector posting steep losses – save healthcare, which was the only area to be down less than 1% in the early going – it was a sea of red out there as the day got under way. However, we didn’t have to look too far to find the greatest source of the pressure, as the financials led to the downside by more than 8% mid-morning.

By the time the New York lunch hour rolled around, the financials were down an eye-popping 12% while the averages were lower by 4%. For the next couple of hours, the market bounced around in a 1% trading range above those lows, but about 90 minutes before the end of the day, a wave of buying kicked in, taking just about the entire market well off their lows. Unfortunately for the bulls, however, that move proved to be a classic bear trap, because as we worked our way into the final hour, the market reversed to the downside, causing the indices to close at the worst levels of the session with losses, on average, of a whopping 4.57%. Meanwhile, volume was heavy on both exchanges and breadth was an astonishing 8:1 to the negative, but probably the most notable aspect to today’s session was that each of the major indices broke to fresh multi-year lows.

Without a doubt, this sort of action is quite dismal, but the good news is that, this market has started to make some real progress in purging the poison that is at the root of all the problems. We’ve been saying for months that a fast and tidy solution to the meltdown in the credit and housing markets was a pipe dream and that an end to this bear market would come only after absolutely nobody wanted anything to do with stocks.

We’ve got a long way to go, but there were some signs, such as a complete lack of dip buying interest and spikes in safer assets like gold and treasuries, that investors are taking steps in the right direction. That said, the bottoming process will not happen overnight, and it won’t occur without some more disappointing trading in between, and while today’s session had some very encouraging characteristics, we are a long ways away from being able to put our capital to work in a meaningful manner.

Free Newsletter: Stalking Stocks with the Shark - Conjecture Over the Fate of AIG Drive Tuesday's Action - 09/16/08

Free Newsletter: Stalking Stocks with the Shark - Conjecture Over the Fate of AIG Drive Tuesday's Action - 09/16/08

Greetings Shark Investors:

The major indices were able to regain some of the ground it lost at the beginning of the week on Tuesday in what was one of the most random and rumor-driven trading sessions we’ve seen in quite some time. Early morning indications were for another rocky start to the day as concerns over a possible failure of AIG continued to grow and DELL said that they see “further softening in global end-user demand” for the third quarter after having already cited such concerns when they reported earnings just a few weeks ago. Sentiment was pressured further as we headed towards the opening bell following a very poor reaction to GS’s earnings report in which they beat earnings estimates but missed revenue expectations as well as news that the research firm Argus had nearly halved its price target for MS as well as

As such, the market opened the second day in a row posting steep losses, but as was the case the previous day, the dip buyers were waiting in the wings to pounce on the weak open. From the get go, investors moved to take the indices off their early lows and back towards the unchanged mark. Following that initial improvement, the averages spiked into positive territory after CNBC reported rumors that a government-backed loan for AIG was back on the table. But, that foray into positive territory proved to be short-lived after the same news outlet said moments later that a private sector rescue of AIG was dead and that the most likely outcome for the world’s largest insurance firm would be bankruptcy.

After that little whipsaw, the action calmed down considerably as we headed towards the Fed interest rate decision. Typically, the trading on such days is dominated by the FOMC news, but with AIG’s fate hanging in the balance, investors were understandably distracted. Moreover, with the possibility of a failure of a massive financial institution looming and a credit market that was beginning to freeze up once again, it’s likely that market participants understood that the level of interest rates has little bearing on the bigger picture at the moment.

Still, fed fund futures were indicating that the market was expecting a 25 basis point cut, and when Dr. Bernanke and his crew decided to keep rates unchanged, citing inflationary concerns, the averages quickly sold off. However, they bounced right back following yet another rumor that the Fed might actually come to AIG’s rescue – for real this time.

Apparently, the source was strong enough for this last rumor, because that triggered a final wave of buying which allowed the indices to finish the day at highs with gains, on average, of 1.44% on heavy volume and breadth that was essentially flat.

Without a doubt, it was quite difficult between the bells to really get a sense what market players were looking for or how they expected events to unfold. Certainly, a failure of AIG would be a major market negative, and as we write this, overseas markets are rallying on news that the Fed has agreed to lend the firm up to $85 billion so that they can meet their immediate obligations. But, are investors really hoping that this will mark a bottom for the market, or will they simply use any reflexive strength to do some more selling? We’ll have to see how that plays out, but that’s exactly what happened after the FNM/FRE seizure two weeks ago.

Regardless, our job as individual investors is to figure out how we’re going to deal with all of this uncertainty and volatility, and that is dependent on your own personal time-frames. While a news-driven market does present good trading conditions for those who have the shortest of time-frames, the bigger picture has not changed. We’re still a long was away from being in a market where we can build longer-term positions. There’s absolutely no rule saying that we have to be placing bets in an environment where we have no edge whatsoever.

Free Newsletter: Stalking Stocks with the Shark Market Takes Major Techncial Damage 9/15/08

Free Newsletter: Stalking Stocks with the Shark Market Takes Major Techncial Damage 9/15/08

Greetings Shark Investors:

We’re sure everyone is well aware of what a tumultuous day it was for the market on Monday. Although market players ended last week hopeful that a white knight would step up to the plate and acquire LEH over the weekend, unfortunately, no one was willing to touch the storied, but troubled, investment bank without the promise of a government backing, and as a result, they were forced to announce that they would file for bankruptcy before the open. Also affecting the already sour mood in the morning was news that MER had agreed to sell itself to BAC, and that AIG was trying desperately to raise capital in order to avert a credit rating downgrade and subsequent failure.

As such, the market started the day by posting steep declines of between 2.5% and 3%. However, the winning trade each time we’ve seen similar gaps to the downside at the open has been to buy the initial weakness, and that exactly what happened almost immediately after the bell as investors bet that the a similar bounce would form. As the morning began to take shape, each of the major S&P sectors were able to move sharply off their opening levels, but given the fact that oil was trading well below the century mark, the early buying was most pronounced in the consumer related areas.

Unfortunately, however, whatever early buying interest that there may have been proved to be short-lived. Instead of moving to build more substantial positions and do some real bargain hunting, traders began to book whatever quick profits they might have had, and in the process, the averages began to give back much if the ground it had been able to make up.

As we worked our way thought the late morning and into the New York lunch hour, the market bounced around above the lows of the session, but began to lose steam as the afternoon got under way after Treasury Secretary Paulson’s press conference. Sentiment seemed to be pressured further following news that the Fed had declined to lend AIG $40 billion dollars to shore up their capital position. While news later in the day that a consortium of banks led by GS and JPM might put together the loan initially encouraged Wall Street, the downside pressure accelerated once again after word got out that AIG would need as much as $75 billion.

After steadily declining for the better part of the afternoon and breaking below the morning lows along the way, by the close, each of the indices lost 4.24%, on average, breadth was almost 10:1 to the negative (it was worse than 16:1 to the negative on the NYSE), and volume, which had been running relatively light early on, picked up quite a bit into the end of the day. Meanwhile, both the Dow and the S&P 500 hit fresh lows for the year, while the Nasdaq was able to hold above its March low by 10 points, give or take.

With the amount of technical damage we saw today, it would be an understatement to say that it was an ugly day for the market. That said, we have been arguing for quite some time that the uncertain environment, lack of buyable charts, and conditions which have been consistent with what we would expect to see in the throes of a bear market suggested clearly that individual investors should be extremely defensive.

The good news is that this is the exact sort of action, as difficult as it is, which will eventually allow this market to put in a real bottom. We’ve said for months that an end to this bear market would only come after the cycle of hope and disappointment played out several times, and today’s losses may help to discourage those who have been so eager to declare that the worst is over to allow hope to guide their investment decisions.

The bottom line is that Monday’s session is a perfect example of why individual investors should always respect the direction of the primary trend and ruthlessly protect their capital when that trend is down. Looking forward, we have GS reporting earnings in the morning and a FOMC interest rate decision in the afternoon. Good news from Goldman and a possible rate cut from the Fed could trigger a reflexive rally, but until this market proves otherwise, we need to continue assuming that any action to the upside will ultimately fail.

Free Newsletter: Stalking Stocks with the Shark - Market Ends Mixed Ahead of Uncertain Weekend - 9/14/08

Free Newsletter: Stalking Stocks with the Shark - Market Ends Mixed Ahead of Uncertain Weekend - 9/14/08

Greetings Shark Investors:

The market finished out a tumultuous week on Friday in a lackluster but choppy fashion as investors bided their time ahead of Hurricane Ike’s landfall and news of a possible buyout of LEH. Indications were for a somewhat flat to lower start to the day early in the morning as various reports floated around regarding possible scenarios to put LEH out of its misery. However, sentiment soured considerably following the August retail sales report. Although expectations were for a headline increase of 0.3% and an ex-auto decline of 0.2%, the actual numbers were worse than expected, with both readings showing a decline of 0.3% and 0.7%, respectively.

As such the market opened the day sharply lower, but as was the case after the previous day’s poor start, buyers stepped up to the plate shortly after the bell, providing underlying support to the broader market. The trading, however, underneath the surface was quite mixed. Given the fact that the resource sectors have taken an absolute beating recently and that Hurricane Ike in currently threatening energy assets in the Gulf of Mexico, both the energy and materials sectors began the day trading sharply higher. Separately, even though financials, industrials, tech and consumer discretionary weighed on the indices, each of those sectors moved quickly off their opening lows.

The net result was major indices that were able to steadily make their way back towards the unchanged mark, finally peeking their heads into positive territory just as the morning came to a close. Unfortunately for the bulls, however, that foray into the green proved to be short-lived, as those areas which had improved so markedly in the morning were sold once again throughout the New York lunch hour. Still, the market was able to stay off its early lows as the resource and defensive sectors stubbornly held on to their gains.

Despite that lunchtime dip, investors once again began to push the broader market back to the flat-line through the afternoon. By the time the final bell rang, the major indices were essentially unchanged and in mixed territory. Without a doubt, it was a very haphazard session, and investors’ confusion over what to make of an uncertain acquisition on LEH, talk of a possible government bailout of the U.S. auto industry, severe pullbacks in GE, AIG and MER, and the imminent landfall of Hurricane Ike was apparent in the number of wild swings throughout the day.

Despite all of the recent drama and hopes that some closure in regards to the mess that has become Lehman Brothers will give this market some tidy resolution to the obvious problems the financials continue to face, the bigger picture really hasn’t changed. There continues to be absolutely no leadership to the upside, and the only trades that have been working have been in the worst looking charts. We’ve been saying for quite a while now that the action remains consistent with exactly what we would expect to see in the midst of a bear market.

In the short-term, meanwhile, one thing that individual investors need to keep in mind is the possibility that any news over the weekend, while it could be met with raucous approval Monday morning, may be followed by the same sort of “sell the news” reaction we saw immediately after the FNM/FRE news. Market participants may seem optimistic right now, but the real test will come after a deal is done.

Regardless, the biggest thing individual investors should be focusing on is not worrying about trying to fully invested right at the bottom – wherever that may be. There will be tremendous opportunities once all of this market turmoil is over, and those who wait patiently for conditions to improve before building substantial positions will be in a much stronger position than those who try to peg an exact turning point.

Free Newsletter: Stalking Stocks with the Shark - LEH Rumors Spark Intraday Rally - 9/11/08

Free Newsletter: Stalking Stocks with the Shark - LEH Rumors Spark Intraday Rally - 9/11/08

Greetings Shark Investors:

The major indices underwent yet another strong intraday reversal, turning what was shaping up to be a panicked open into a mad dash to add exposure and cover shorts into the close. As we headed towards the open, index futures pointed to a much lower start to the day as concerns over the health of the financial sector continued to swirl, with shares of LEH, in particular, about 40% lower in pre-market trading. Unfortunately, sentiment soured further following the weekly jobless claims, which were worse than expected, coming in at 445K versus the anticipated reading of 440K.

However, even though the averages opened the day sharply lower on breadth that was approaching 10:1 to the negative and there seemed to be a general feeling of panic in the air, dip buyers stepped right up to the plate just a few minutes after the open, taking most of the major S&P sectors immediately off their initial lows. For the rest of the morning, the market was able to make steady progress to the upside, finally reaching barely into positive territory as we headed into the New York lunch hour.

While that brief foray into the green proved to be short-lived, as the averages began to lose steam for the next 90 minutes, buyers began to move aggressively once again as the afternoon got under way. Except for a small dip at the beginning of the final hour, the broader market spent the rest of the day moving sharply higher, with the indices finally finishing out the day at highs with gains of 1.37%, on average. Interestingly, however, despite those gains and the fact that each of nine economic sectors closed with solid gains, breadth was actually negative while volume, while heavier than what we had been seeing over the past several weeks, was the lightest of the week so far.

Certainly, the ability for this market to rally so sharply after such a panicky open is nothing to scoff at, but given the internals, it isn’t too much of a stretch to assume that what we saw into the end of the day as rumors about possible suitors for LEH began to swirl was driven by a good deal of short-covering. Be that as it may, the solid gains brought the serial bottom-callers out once again to proclaim how the worst is over and what a great bargain this market is right now.

At some point, they’ll be right, but the technical picture in the major indices remains quite troubling. Not only does there continue to be a complete lack of buyable charts, but the few decent technical set-ups out there are being completely ignored. Instead, most of the strength is has been in the worst looking charts, and that is exactly what we would expect of a bear market.

The bottom line is that, while these intraday reversals we’ve been seeing lately can make for some good day-trading for those who can get the timing just right, the bigger picture has not changed at all. Unfortunately, until the pricing action proves otherwise, individual investors will be best served by simply assuming that any action to the upside will be used by trapped longs to lighten their loads and for shorts to press once again.

Free Newsletter: Stalking Stocks with the SharkAverages Bounce Mildly Mid-Week 9/10/08

Free Newsletter: Stalking Stocks with the SharkAverages Bounce Mildly Mid-Week 9/10/08

Greetings Shark Investors:

Although the major indices were able to post solid gains during Wednesday’s trading session, it wasn’t nearly as strong as the serial bottom-callers – who were, of course, out in droves today – would have us believe, nor did it really attract the sort of worried rush to add long exposure that we’ve seen so many times over the past year. Following the previous day’s absolute drubbing, indications were for a much higher start to the day as investors awaited LEH’s preannouncement of their third quarter earnings, hoping that the beleaguered investment bank’s management had come up with a solid plan to shore up their capital position. Unfortunately, “concrete” and “plan” were not two words that can be associated with what LEH had to offer up, as all they really had to say was that they were exploring “strategic alternatives” in regards to selling a part of their business in order to have enough capital to cover their massive losses.

As such, the strength the index futures were showing early in the morning was completely erased just after that news was out. However, they were able to climb back slightly as we headed towards the opening bell, prompting a somewhat higher start to the day. For the first 30 minutes or so as the day got under way, the market was able to make some decent progress to the upside, but most of that initial strength was concentrated in the resource sectors – which have taken an absolute beating since Labor Day – the more defensive healthcare, and industrials. Tech, which had gapped at the beginning ostensibly on the heels of updated third quarter earnings guidance from TXN (while their outlook was still in-line with estimates, apparently many were worried about a possible warning), sold off steadily after the open.

Regardless, just about the entire market began to lose steam for the next hour, moving back towards the unchanged mark, with financials leading the way. However, the major indices were able to recover as we headed into the New York lunch hour, spending the next couple hours hovering in a relatively narrow trading range just under the highs of the session. But just as it seemed the bulls and bears might be in the process of reaching a standstill, a sudden wave of buying in the financials prompted a move to what would turn out to be the highs of the day for the major indices.

Unfortunately for the bulls, the market was unable to hold on as we headed towards the final bell, each major S&P sector turned lower, sending the indices to a close well of the highs of the day with average gains of 0.60%. Certainly that advance is nothing to scoff at, but at the same time, breadth was just barely positive, volume was the lightest we’ve seen since the lame bounce last Friday, and the bulls were completely unable to fend off the sellers in the final hour.

As we mentioned yesterday, while the sort of action that we’ve seen so far this week – Monday’s intraday reversal, Tuesday’s big drop, and today’s modest bounce – suggests that the mood is starting to become as sour as we’ve seen it at any time this year, it also may be an early sign that investors are becoming disillusioned enough that they might not be so willing to blindly chase strength as they have been in the past. We’ve talked several times about how bear markets don’t scare you out, they wear you out, and there are some initial signs that investors might be starting the get worn out.

Still, it’s way too early to assume that we’ve seen enough cycles of hope and disappointment play out that we can start looking for a more meaningful bottom. In fact, the most many of the traders we speak with on a daily basis are looking for is some sort of oversold bounce. The key, if one should kick in, will be to book any gains quickly and not trust any action to the upside to last. Nobody said that dealing with a bear market would be a walk in the park, but embracing the current conditions rather than fighting them will only put us in a better position to profit from the tremendous opportunities out there once conditions improve.

Free Newsletter: Stalking Stocks with the Shark - Market Beast Takeths Away - 9/9/08

Free Newsletter: Stalking Stocks with the Shark - Market Beast Takeths Away - 9/9/08

Greetings Shark Investors:

Just one day after the serial bottom-callers where jumping with joy, saying that the government bailout of FNM and FRE had put a bottom in this market, investors headed for the exits in droves, pushing the major indices right back to the levels we saw at the close last Friday. Following the previous day’s solid gains, indications were for a higher start to Tuesday’s trading session early in the morning. However, sentiment soured as we headed towards the bell, prompting a somewhat soft start open.

Despite that, investors stepped up to the plate, buying the initial weakness and pushing the indices modestly higher as the day got under way. Moreover, the market essentially ignored some disappointing economic data. Although expectations were for a slight dip in pending home sales for July following last month’s surprising 5.8% surge, the actual drop was more than double what had been expected at -3.2%. Meanwhile, the July wholesale inventories also missed estimates, rising by 1.4%. Interpreting inventory builds is always tricky as it could either mean that businesses are increasing goods for sale in anticipation of higher demand or that actual sales are soft. Unfortunately, in these difficult economic conditions, the latter is probably more likely than the former.

While that news was met with indifference, whatever action to the upside there was as the day got underway proved to be short-lived, as a the first of what would turn out to be many wave of selling kicked in, sending the averages well into negative territory. Although the downward pressure abated an hour later and the bulls did a respectable job of pushing back after a couple of tests of the worst levels of the morning, they were eventually punished for their efforts early in the afternoon.

As soon as those lows were breached, the market spent the rest of the afternoon moving steadily downward as each of the major S&P sectors fell solidly into the red. However, financial stocks were the hardest hit as LEH was in the process of shedding a little less than half of its market value, while an almost 4% drop in oil prompted massive selling in the energy sector. Unfortunately for the bulls, the afternoon downdraft accelerated into the close, with the indices finishing at the lows of the session with losses of 2.83%, on average.

Without a doubt, it was a very ugly trading session. Breadth was extremely bearish at 5.4:1 to the negative on volume that accelerated straight into the close. We mentioned in our last Stalking Stocks evening review that, while many were busy declaring an end to this bear market, individual investors were better off by keeping their cool and waiting to see what would happen once the initial excitement passed. Well, we didn’t have to wait to long for that to happen, and all once again got a reminder of why it is so important to not let blind hope guide our investment decisions.

The good news is that those who have been waiting patiently for this market to come to them rather than trying to be fully invested at an absolute bottom are in a good position to capitalize when market conditions do improve. We saw some real despair between the bells on Tuesday, and that sort of absolute frustration will likely be the only thing that will allow this market to eventually put in a meaningful bottom.