After Market Close March 18, 2008

Big Rally

We've heard that "sentiment doesn't work" a few times over the past couple weeks. That's another sentiment cue in and of itself.

Obviously, market sentiment DOES work, since it told us to be on the lookout for a BIG rally yesterday. We got it. I'd say that the character of the market has changed. We'll pullback somewhere in here, but the odds favor a rally of some duration. It's not confirmed, but I'm pretty sure we'll be up another 2% when it officially does.

DJIA: The Dow stopped right at resistance. I'll likely pause, but then go through.


SPX:  The S&P stopped right at the 21-day. If we're really still in a Bear, they'll kill it. I think that they won't.


NDX: The Nasdaq had a good day, but I see better ahead.


RUT: A nice move in the Russell. The squeeze hasn't really begun, yet.


HUI: I suggested that the miners were vulnerable, but interestingly they fell earlier than I expected. This is bad for the golds.


SRVY: Greenfield Online got us, but a nice profit is good.


NPO: Enpro bounced very smartly.


EL: Estee looked good and got better.


CSCO: Cisco took off.


PBH: Prestige rallied nicely too.


CKP: Checkpoint is gone for a big profit. We're smart enough to take a 10% additional profit when they give it to us in a day. Active traders might consider buying it back if we pullback to 26.5.


KOF: Mexi-Coke rallied nicely too, though the close lacked punch.


JOE: St. Joe has been a pillar of strength.


FE: First Energy broke up.


QSII: Quality Systems looks promising to me. It's a volume thing.


TSTR: Terrestar has energy for a rally.


DWA: Dreamworks still looks higher to my eye.


MTRX: Matrix Service didn't come back as we thought so lets pass today.


TRMB: Trimble came on, but didn't break out.


IN: Intermec looks good.


ARJ: Arch Chemical ought to play and it could be a long run.


Summary:

The market is trying to confirm the turn, but in my experience it's a fait accompli. Of note: the weekly trend will turn up if we hold anywhere close to here. That would imply at least 2 weeks of rally. I'm open to the prospect of the entire Bear market being over, too. I'm one of about 3 people on Wall Street who think that, too. Bonds look vulnerable. Perhaps a strategy of buying near term corporates and shorting long term government bonds makes some sense in the coming days.

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


Current Positions:

Long 50% NPO at 31.04, stop at 29.59

Long 50% EL at 44.23, stop at 42.94

Long 25% CSCO at 25.04, stop at 23.51

Long 25% PBH at 8.19, stop at 7.83

Long 25% KOF at 56.42, stop at 52.59

Long 25% JOE at 39.67, stop at 38.47

Watch List:

FE: Short 50% on a print of 66.72, stop at 69.97

QSII: Buy 25% on a print of 32.62, stop at 30.21

TSTR: Buy 25% on a print of 5.57, stop at 5.03

DWA: Buy 25% on a print of 26.21, stop at 24.11

TRMB: Buy 50% on a print of 28.63, stop at 27.31

IN: Buy 25% on a print of 23.58, stop at 21.67

ARJ: Buy 25% on a print of 35.97, stop at 33.48

Changes in Current Positions:

We are stopped oput of SRVY at 12.21 (+6.37%)

Move the stop up on PBH to 7.83

We sold CKP at 28.20 (+10%)

Move the stop up on JOE to 38.47


*30 Minute Trading Rule:

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

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

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