Names of Interest for the Week of 06/24/2012

Coming into a severely overbought market Thursday morning, I think many participants expected some variation of a "pullback." However, the dramatic nature of Thursday's action was surprising to me. From my perspective we still seem to be in a news driven market, where a rumor of a rumor can move us 100 points in a few minutes.

Despite the limited signs for a sustainable market trend presenting itself, I am still seeing some names with constructive price action coming into the week.

Here are a few, with the levels I will be using to manage.

  

Good Luck!

A Few Setups

The recent market action seems to be showing early signs of stabilization. Granted there is significant headline risk, however such risks can be difficult to quantify and or predict. As a result I will continue to focus on the price structure of the market.

Here are a few names I came across so far this weekend that have been acting constructively.

Best of luck this week!

“Original Thought in a Digital and “Social” World”

In a society often bombarded with visual stimuli, whether it is cell phones, laptops, televisions, social media, music or any other form of digital entertainment, it is easy to become engrossed in all of the above. Being part of a generation that has grown up with such means at our fingertips 24 hours a day 7 days a week it is clearly evident how easily many become attached to their devices. In my opinion social and other digital media have created a superficial reality that pressures us to need to know everything about everyone on a real-time basis. Regardless of the quality of the endless abyss of content being published, the social forces of our society often categorize it as important.

I have witnessed countless times the risks associated with an endless desire to be plugged into the “action” all the time. Having endless “information” at our disposal on a real-time basis can make it easy to feel as though we “need” to always be “connected.” Once we get bored with exploring the vast amount of information on the web, social media the television or our cell phone is always waiting to provide our next buzz.

In conjunction to a digital reality most of us (although not nearly as many) have full-time job responsibilities as well. Between working 8-10 hours a day and constantly checking up on the “information” through our phone, the web, social media, checking e-mail and watching television, it is easy to lose sight of finding time for anything else. An ordinary day can easily become one of a constant digital reality.

The value in such of a lifestyle can certainly be held for debate as to whether or not it is a healthy form a genuine reality or not. The issue I see with the “average day” mentioned above is the lack of room for original and creative thought. It may be a cynical opinion of mine; however I’d argue the previously mentioned daily routine will not bring much depth. 

As we become accustomed to always being connected and stimulated every waking moment, our conversations and interactions can easily become a mere reflection of the virtual reality we are always connected to. I’d argue it is important realize the risk of such realities and find an outlet for original expression; expression beyond that which we are told to “think” about. In my opinion, living a daily life of merely observing and reacting to externally generated content can be a vicious and shallow experience. Whether it is conscious or subconscious, the “pressures” of the previously mentioned activities can easily cast a shadow on the potential for originality in my opinion.

Rather than being a passive observer of the least common denominator of poor quality externally published content, actively engaging in original, creative thought can account for significant value in my opinion. Avoid being a mere reflection of the aforementioned virtual reality. Use the influx of readily available information to enhance your learning curve, rather than accept what others would like you to “learn” and “think.”

"Greed is Good: The Demonized Speculator"

Greed is good?

In an industry characterized by its excesses and lavish lifestyles, the world of finance has taken on the role of a materialistic, savage-like society. Is greed pervasive throughout high finance, maybe it is, maybe it isn’t, it’s neither my concern nor my business to judge. My question is how far can greed get you? Front row seats at a Lakers game, sure, a 4,000 square foot apartment in midtown, sure, ringing the opening bell on the NYSE, maybe. From the bottom looking up it is easy to be critical and or cynical toward such “luxuries,” but I often wonder where they take you.

At the end of the day trading is a game from my perspective. Most fail, some make it by, others make it big. A game in which an individual is accountable to himself and potentially clients, only as good as his last trip to the plate. A game where loyalty is only measurable in relation to a benchmark for most players involved. If you outpace a benchmark on a regular basis, the aforementioned “luxuries” become second nature. Money continues to flow in, as others hope to piggyback off of your mastery at the game. However, in the back of any trader, investor or speculators mind, they know it can all come to an end with one bad decision.

So what drives an individual to stay in a business of limited loyalty and failure always lurking by your side?

My question to those who’ve “made it” is when and where does it end? Is the end characterized by being in those court-side seats, or 4,000 square foot apartment, or is it elsewhere? Is it bragging to others about your excesses to let them know you are better at the game than they are? Is it having the power to be so influential, an entire nation depends on your actions?

Or is the end characterized by making a friend financially independent by protecting his/her hard earned savings for 30 years? Having the freedom to explore one’s individuality and other interests by being your own boss and setting your own hours? By helping a parent avoid financial catastrophe, before the collapse of a euphoric society? Being able to fund a child's enormously expensive higher education? Or is it being able to spend a weekday afternoon outside with your child/spouse/parent etc., exploring and or sharing various interests in life and having the means to do so? 

I guess it all depends on where and how you derive value.

As a child I was always taught to “follow my passion,” engage in activities and with others that interest me. At some points it can be difficult to pursue a passion, at some points maintaining contact with interesting people can be difficult. However, from my experiences it seemed like a common lesson taught by parents and a commonplace objective of most of my adolescent peers. 

So I ask those that demonize the “speculator,” the trader, the financier to look in their child’s eyes to find the shallow, cold, ruthless greed and “passion” to be a figurehead of materiality. May it be found in some aspiring traders, sure.  However, I would like to think the second of the two “ends” is also a possibility to consider before blanketing the objectives of those in the profession.

I'd argue that many pursue a passion in finance, trading and or speculating for many of the same reasons so many other Americans go to work every day.

Risk: An Interesting Aspect of Trading and Life

Risk is an interesting aspect of trading and life. When I first started trading I was nearly paralyzed by risk, hesitant to act in fear of losing.  After becoming more comfortable with a strategy I realized risk is a necessary part of the game that can’t be avoided. When viewing risk as the cost of a potentially new opportunity, it becomes a healthy component of trading.  On the contrary, taking risk in an endless desire for more (a.k.a. greed) can be dangerous on a number of levels.

Synonymous with trading risk are non-financial risks taken in our daily lives.  As stated in Wall Street Two “Time is our most valuable commodity, not money.” Provided that our time is limited, we are required to take risks.  Whether it is risking your livelihood to pursue your passion, asking an uncomfortable question, or giving your all in hopes of developing a transformational business, each include risk. Synonymous with trading, taking risks in life can be viewed as the cost of a potentially new opportunity.

In both trading and life losses can become synonymous with risk taking. However, the way in which it is viewed becomes a distinguishing mark. In pursuing an aspiration do not the let the associated risk dampen your desire, assuming one’s actions are grounded in reason.

"A Few Signs of Caution"

Seems like posts about market direction are becoming a dime a dozen lately. Amidst an environment of strong conviction by so many, I think it is important not to let your thesis overlook price.

I figured I would share a few reasons why I have become cautious on this market.


$QQQ- Start with the Nasdaq which seems to be showing signs of distribution on the daily. I will be watching how price reacts to the $64.50-$65 area which is a confluence of price support and moving average support.

$SPY- The macro trend from the 10/04 low was breached recently, which changed my point of view from an uptrend to a neutral trend. The more recent price action has illustrated a bear flag on the daily. A break below $137.50ish, more importantly 1370 on the S&P cash would be a sign of weakness for me. Both the 10 and 20 period moving averages had served as support and were broken. As price negotiates the 50 day moving average we are not seeing much of a bounce.

$AAPL charts are all over the place; however it has led this monster run the entire year. Flirting with the 50 day and looks heavy, we'll see how earnings look. However, the recent distribution is definitely a sign of caution for me.

$JJC- Lastly, king copper recently broke below its recent trading range which is another sign of caution in my opinion.

Could we rip higher this week and fool a number of people including myself, sure. However, as long as we are below the 10 and 20 period moving averages with few signs of accumulation on the S&P I will remain cautious.


"The less I cared about whether or not I was wrong, the clearer things became." --Mark Douglas

How a Photo and Social Media Inspired a New Passion and Hope

A few months back one of the traders I follow on a regular basis posted a vacation picture from Cinque Terre Italy. In looking at the photos I would be hard pressed to find a more amazing landscape. Although Italy had always casually awed me with respect to culture, history and family tradition I had never gone much beyond hand me down traditions and here say stories. A combination of the sheer beauty of the photo, an unending interest in Italian cooking and an excuse to escape studying for a professional certification exam sparked an unimaginable curiosity I had never expected in my wildest dreams. And so I began my journey into learning Italy through casual reading, followed by sharing my new found passion with friends.

The entire situation still strikes me funny, as I would have never expected an individual I have never and likely will never meet spark months of unparalleled curiosity in my life. None the less, many months later, my passion to learn Italian culture is only becoming stronger and more enjoyable. The journey has taken a strikingly similar path as my interest in trading did, which began with casual reading on my own, followed by a need to share my passion with friends of similar interests and exchange ideas and information. 

Aside from the enjoyment I get from learning a unique and amazingly interesting Italian culture which I will likely post about going forward; I also find reprieve in the social forces of my generation that enabled such passions to foster. I’m still not sure whether or not the ease with which I was able to find friends with comparable passionate interests to mine a result of chance, or a representation of our generation.

However, being the relatively optimistic person I am, I’d like to think it speaks to the potential of our generation. The aforementioned individuals I had encountered along my adventures of trading and learning Italian culture had a head start on their respective learning curves. Both were exceptionally receptive to my new found interest and willing to fulfill my curiosity on a recurring basis that most would take to be obnoxious. They had both exploited the wealth of information available to our generation through 24/7 internet access, blogging, social media, tangible experience and were more than willing to collaborate on their findings with me.

Is it merely a coincidence to find such individuals? Maybe.  Is it just a one off example of a group of college students amidst many within our society without such privileges? Maybe. Or do these peer mentors of mine speak to an example of the value within the structure of our generation and the passion, intelligence, willful collaboration and generosity of the generation to come. Let’s hope.

Thanks for your help.

Idea for the post inspired by Barry Ritholtz

http://www.ritholtz.com/blog/2012/04/the-future-of-america/?utm_source=dlvr.it&utm_medium=twitter