ShadowTraderPro Focus Report for October 24, 2008
The ShadowTraderPro Focus Report is your every morning dose of market reality brought to you from the resident geniuses at ShadowTrader. Overseen by Chief Equity Strategist, Peter Reznicek, each issue contains a full report on the prior day's action, including market internals, technicals, and what sectors were hot and cold. Each issue also includes the ShadowTraderPro Model Portfolio, which updates members on what stock plays STPro is currently engaged in officially, as well as provide a daily list of long and short setups for more self-directed traders and investors.
If you have any questions or comments regarding commentary or plays in this newsletter, please email to focusreport@shadowtrader.net.
The Big Picture
Good Morning, Traders. Volatility continues to be the name of the game. Not too much to report today due to yesterday's choppy action whereupon what used to be a month in the S&P was rebounded in the final 90 minutes of trade. How do we go from being $5.00 in the money on our SPY short to underwater in less than 2 hours? We repeat, for the umpteenth time, this not an investor's market.
Dow showed some relative strength yesterday and actually closed itself back up into the wedge or triangle that has formed the bear flag pennant in the markets. This is just a sign of ongoing huge volatility, so we remain that unless there is a close over the top line of the pattern, the bearishness should continue unabated. Chart is below...
Internally, things improved a bit off of the lows which is what caused the run-up rally to be as strong as it was. Although the market went lower than the prior day, look what was happening "under the hood"...
The purple line represents the amount of volume flowing into stocks moving down. The green/red line is the amount of volume flowing into stocks going up. Note the divergence here as the spread was actually wider on Tuesday, yet the market went lower on Wednesday. This is known as positive divergence. You can clearly see how on Wednesday, the buyers were barely registering on the radar as the $UVOL was just bottom feeding all day like a sea cucumber. This is normal on a day when the market is getting crushed. Keeping a chart like the one above up all day boosts your confidence on the short side when daytrading or entering new shorts on a day like that. The interesting phenomena happens the next day on Thursday. If you want a reason as to why the market rallied so hard at the end, its because it was not as bearish to begin with. The positive (read: not as bad) divergence in the breadth relationship tells the tale. When new two day lows are made and the market internals do not confirm them, then those lows often snap back and close surprisingly strong.
In the bigger picture, it takes more than one day of such divergence to signal lasting bottoms, but regardless, it's a very important phenomena to be aware of. That's why we teach it so much in the Squawkbox and in this newsletter. If you want to investigate the use of these indicators some more, our own Peter Reznicek will be conducting a free workshop on this very subject on November 7th at the Washington DC money show. Come by the ShadowTrader booth (#202) and say "Hi". Under The HoodWhen we say "under the hood" we mean market internals, ie: what was really happening behind the scenes. ShadowTraders who listen to our daily broadcast every day live on the thinkorswim platform know that all closing figures on the major averages should only be interpreted in the context of market internals. Look for convergences and divergences in the breadth, a/d line, and trin figures below to either confirm or cast doubt on what all those talking heads on TV are telling you.
| Dow Jones Industrial Average | 8691.25 | 172.04 | 2.02% | | S&P 500 | 908.11 | 11.33 | 1.26% | | Nasdaq Composite | 1603.91 | -11.84 | -0.73% | | Nasdaq 100 | 1239.16 | 2.07 | 0.17% | | Russell 2000 | 489.92 | -12.05 | -2.40% | | Spot Gold | 714.70/oz. | -20.50 | -2.78% | | Crude Oil | $67.84/bbl. | 1.09 | 1.63% | | NYSE Overall Volume | 1,689,789K | n/a | +8.53% | | Nasdaq Overall Volume | 3,239,653K | n/a | +23.14% | | NYSE Breadth | 1.2 : 1 | Negative | | | Nasdaq Breadth | 2.8 : 1 | Negative | | | NYSE Breadth Ratio | 44.2 | | | | Nasdaq Breadth Ratio | 26.5 | | | | NYSE Advancers/Decliners | -761 | | | | Nasdaq Advancers/Decliners | -1206 | | | | NYSE Trin | 0.75 | | | | NASDAQ Trin | 1.12 | | | | $VIX | 67.80 | -1.85 | | | | ES Pivot Points for Friday | R3 | 1007.58 | R2 | 965.42 | R1 | 940.33 | Pivot | 898.17 | S1 | 873.08 | S2 | 830.92 | S3 | 805.83 | | | Strongest Groups: | Oil | Energy | Utility | | Weakest Groups: | Home Construction | Coal | Mining | Heads Up
- Today
- 10:30am EST - Existing Home Sales
- Reporting earnings today: ACU, ACPW, AXB, CACH, SUR, CMCO, CCUR, CPO, DCOM, EMCI, EBTX, EXC, FFCH, FNBN, FO, GCI, GRNB, HRZ, IDXX, IR, ITT, OSBC, SAIA, SR TROW, TKR, UST, VVI, WAL,
- Monday
- 10:00am EST -New Home Sales
- Reporting earnings today: ABAX, ALB, ACV, ARLP, AFG, ASI, ACF, AIT, ACI, , ATHR, AXS, BBD, BOH, BEAV, BWP, BWLD, CLMS, CAJ, CF, CHG, CHFC, CHH, CNA, CR, DLA, HXM, DCO, EXP, EWBC, EPIQ, EXEL, FIS, FADV, FCNCA, FPL, FELE, HAE, HGR, HLIT, HTLF, HFFC, IBN, IBA, BOOT, LKFN, L, LO, MPG, MASI, , MTH, MCRL, MSA, NJ, ONB, OMI, PTC, PRXL, PENN, PFWD, PCL, PPD, PRGX, PVTB, PBKS, PROV, RCII, SILC, SLG, SOHU, SNBC, SXL, TXRH, NAVG, TDW, TOYS, TRCR, TZOO, TYL, UCTT, UHS, VZ, VRTX, WINN, WMS
- Tuesday
- FOMC Meeting Begins
- 07:45am EST -ICSC-Goldman Store Sales
- Reporting earnings today: RNT, ACE, ACTL, ADVS, ACH, AMED, AMX, ACC, ECOL, APOL, ASH, ATAC, BBX, BBSI, BEC, BMS, BXP, BYD, BP, CAI, CALD, CP, CSWC, , CRS, CRA, CNC, CTX, CEPH, CPHD, CRDN, CHKP, CBI,, CMP, CVG, CTS, CRIS, CYNO, DENN, DRIV, DWA, ICA, EAC, ECPG, ETR, EPR, EXAC, EXR, FALC, FEIC, FMX, FPO, FISV, FLS, FMC, FORM, FDP, GKSR, GTY, TMM, HMA, HSII, HEP, HMC, JLL, KSU, KDN, KRC, LNC, LUX, MTW, MLM, MAS, MCK,MEDW, MV, MOLX, NLC, NATI, NETL, TNDM, NAL, OXY, ODSY, PABK, PACR, PC, PCX, PDFS, PEET, PDA, PLXS, QLTI, KWR, RNR, RFMD, ROC, RCKY, RCI, RCL, STD, SEPR, SKM, SII, SAH, SKT, TASR, TFX, TIN, TPP, EL, MHP, TRP, TRMK, ULTI, UA,, UNF, URI, X, USG, VLO, VSH, VPRT, VTO, VOCS, WRB, WDR, WLT, WTS, WBSN, WHR
Bulls and Bears This section is for self-directed traders and investors who like to "do it themselves". Every trading day, Bulls and Bears will list long and short equity setups with defined entries and stops. Note: A listing in this section does NOT necessarily mean that the stock will end up as a part of the ShadowTraderPro Model Portfolio. Plays listed here change daily and are not managed or tracked by ShadowTrader unless traded via e-mail alert.
Long Ideas
| THOR | 26.40 | 24.79 | Still the strongest stock out there. Stop longs tight in this market! | Short Ideas
ShadowTrader Model PortfolioThe matrix below shows all current ShadowTrader Pro plays in the Model Portfolio. The Model Portfolio contains only those plays that are sent out in real-rime via email. Bulls and Bears plays above are not actively managed or tracked. Current open positions are on top, with positions that were closed in the current calendar week on the bottom. Closed positions are moved out of the matrix on Monday mornings and posted in our performance pagehere.
To get the most out of your subscription and for detailed instructions on how to structure your own portfolio, read our Focus Report User's Guide
| sym | dir | size | date
entered | entry
price | date
closed | exit
price | target | stop | status | mark
to
market | p&l
points | p&l
capital | capital
commit | OPEN POSITIONS - week of 10/20 - 10/24 | SPY | Short | 50 | 10/22 | 91.05 | n/a | n/a | 79.00 | 96.00 | open | 91.69 | (0.64) | ($32) | $4553 |  | | CLOSED POSITIONS week of 10/20 - 10/24 | | MTN | Short | 150 | 10/22 | 23.66 | 10/24 | 23.67 | 20.00 | 25.20 | closed | n/a | (0.01) | ($2) | $3549 | | MTN | Short | 150 | 10/22 | 23.66 | 10/24 | 24.73 | 20.00 | 24.50 | closed | n/a | (1.07) | ($161) | $3549 | | None | | | | | | | | | | | | | $0.00 | | | | TOTALS: | 50 | open shares (open capital committed doesn't include closed trades) | $4,553.00 | | Click here for ShadowTrader Pro closed trade stats |