Bookkkeeping: Morning Purchases

Submitted By Trader Mark
I think it is becoming more clear to the market, and hopefully blog readers, that what we've been pounding the table on for over a year plus is coming to fruition. The recession is here (and HAS been here for those who don't live in the upper 10% or in a subset of states with heavy natural resource exposure) and the government reports, despite all their best attempts, are reflecting a portion of that (finally). We continue to flutter between "hope" and "denial", and that is the only thing that makes this tricky - the ultimate destination is clear (to me). But guessing what side of the bed the market wakes up on every morning is the tough part. However there are some very dangerous things potentially happening which I'll get to in another post.

This remains a traders market, not an investors - I am only buying 2 sort of charts - stocks in great uptrends that are pulling back to a support OR totally obliterated stocks. As I've said over the past few months the fundamentals mean nothing, and everything is now a "bank stock". Meaning they might as well have as bad of fundamentals as financials because that's how the market is treating almost everything. So with that in mind I'm buying some beaten down merchandise especially in the commodity space with the intent to flip out of it (there are no long term holds in this era) when they inevitably pop.

Added to Mosaic (MOS), Potash (POT), National Oilwell Varco (NOV), James River Coal (JRCC)

The latter name is what I am using as a proxy for all the coal names - I could in theory buy stock in all 4 names and then flip out all 4 in a week... but I'm just using 1 name to make it simple. The charts all look the same so I'll just use one as a proxy - 6 months of gains wiped out.

LDK Solar (LDK) has a great chart that is pulling back so I am adding to it as well

A-Power Energy Generation (APWR) has now pulled back to near its 200 day moving average

Flowserve (FLS) has quickly fallen from the upper $120s where we cut back severely a whole 48 hours ago, to its 200 day moving average of $112 so we buy it here and flip it out back in the $120s. I went to a simple rule about 5 weeks ago, anything breaks a support we cut it no questions asked. It has worked about 80% of the time and has saved us a lot of losses. Here is a great example.

Research in Motion (RIMM) which we also cut back a week ago today @ $125s and I wrote was a very promising short candidate due to the "double top" formation (which I cannot do and hence our performance is lagging where it should be) I am buying back today near $103. That is a 17% gain in 1 week we left on the table since I cannot properly hedge this portfolio in marketocracy.com. When the real fund is up and running we will be able to take advantage of these opportunities.

Other than LDK Solar, all these stocks need to be "flipped out" of - as that is the only way to make money in this market since no trend lasts. They are no different than banks to me anymore because they are no different than banks to the hedge funds who dominate trading. So once again this list (ex LDK) is dominated by terribly beaten stocks, similar to financials, retailers, or homebuilders 3 months ago and I'll treat them as such - trash that must be gotten rid of the next bounce. Despite liking the fundamentals of them all. Fundamentals mean nothing. I keep repeating that. Every stock in this market is the same now - the best chance for success is buying after repeated punishment and flipping out on the oversold bounce/short covering. It is a very difficult way to make a living however.

To be clear, I am not saying these are "the bottoms" in these stocks, but we've cut most of these to the bone and are now beginning to scale back in.

As for the overall markets, we have a date with destiny with the July 15th lows (S&P 1200) - I expect an initial bounce off that level as it is defended but ultimately as more hope is extinguised to break through it. But we'll assess when we get there.