Market Swimmer

Since last November, the smart money has been traded based on the assumption that US economy would headed for a recession. The big institutions have been selling on every little bit of ralley, as a result the commercial net positions were down from roughly $40 billions to negative $10 billions. This has been coincided with a sever sell-off of the Baltic Dry Index (BDI), which reduced about 40% from its peak at November high. BDI, a benchmark for the price of shipping bulk commodities such as iron-ore, is widely regarded as a leading indicator for world economic activity.

Recently, however, the BDI index has reversed its down trend, increased 16% since the January low according to Bloomberg.com.

BDIY:IND
BALTIC DRY INDEX
02/11/2008   Currency: USD

I am not sure the recession fear is over. As we could see this morning, just as the NASDAQ and DOW tried to make some gain, the AIG problem hit the wire and the market slided in the morning trade. However in the afternoon trading all the indexes waged a turn-around and held their gains at close. This is a good sign, at least NASD showed some kind strength we have not seen for a while.

 I don’t expect all the sub-prime trouble has gone away, the financial stocks are still very weak. But this is maybe the kind of bear market ralley we had hoped for. When everybody thinks that there is no way for the market to go up, maybe (just maybe) it’s the time for market showing some strength. As some economists are saying, we are already in recession, people have already priced in all the bad news, so the market can inch up even with some breaking of bad news!

The master of technical analysis, Helen Misler commented:

RealMoney - Premium Content Nasdaq Volume Suggests a Rally Is Near 2/11/2008 8:20 AM EST By Helene Meisler This indicator can be a bit early, but it has predicted every previous market low. More

If you are bold enough, you may want to take advantage of this opportunity, test the water and shop for some badly beaten stocks to make some money. I got a few shares of RIMM a few days ago and made some nice gains for a change. Although in the afternoon the blackberry service was down in North America, but I don’t think they will keep it down for long. If you believe the ralley has some leg, your bottom fishing chance is pretty close, don’t you agree?

Sorry I have been away for so long, if you need any picks or any more discussion, please feel free to leave your comments.

Thanks,

Market Swimmer

Barron’s Best and Worst Tech Stocks Of 2007: Barron’s discussed the best and worst technology stocks for 2007 in this week’s “Technology Trader” column. Some of the names mentioned were First Solar (FSLR - Cramer’s Take - Stockpickr), Baidu.com (BIDU - Cramer’s Take - Stockpickr - Rating) and Charter Communications (CHTR - Cramer’s Take - Stockpickr - Rating).

Some Leaders Make Most Of New, Rocky Uptrend

December 21, 2007: 08:05 PM EST

Dec. 24, 2007 (Investor’s Business Daily delivered by Newstex) –

Despite the stock market’s sometimes-rocky performance, a number of IBD 100 stocks have scored sizable gains in recent weeks.

The IBD 100 and other IBD indexes logged follow-throughs on Nov. 28, signaling a new market uptrend was underway.

The rally has struggled, but some of the same leaders of the prior uptrend are among the best performers of the new.

Among IBD 100 stocks, one of the better price movers has been Baidu.com (NASDAQ:BIDU) BIDU. The company, which operates China’s No. 1 Internet search engine, again topped the IBD 100. Baidu.com found support at its 10-week moving average, a sign that institutional investors stepped in to buy shares. The stock has been forming a base for seven weeks.

CNN Reports

Friday, December 21, 2007

SHANGHAI, Dec 21 (Reuters) - Chinese stocks rose on Friday as investors decided an earlier-than-expected interest rate hike would do little damage to bank profits, though real estate shares were soft. The Shanghai Composite Index <.SSEC>, which began bouncing on Wednesday from near chart support at its late November low of 4,778.727 points, closed 1.15 percent higher at 5,101.779. Gaining stocks in Shanghai outnumbered losers by 725 to 106, while turnover in Shanghai A shares rose to a fairly active 103.0 billion yuan ($14.0 billion) from Thursday’s 87.3 billion yuan. The rise of turnover to a one-week high was a positive technical signal. Key resistance for the index is the December high of 5,209.705 points, any break of which would trigger a bullish double bottom formed by the November and December lows.
Shares in Industrial & Commercial Bank of China (601398.SS: Quote, Profile , Research)(1398.HK: Quote, Profile , Research), the biggest bank, climbed 1.52 percent to 8.01 yuan as some analysts interpreted the structure of the rate changes as showing authorities wanted to protect banks’ profits. Elsewhere, non-ferrous metals shares rose with Aluminum Corp. of China Ltd. (2600.HK: Quote, Profile, Research)(ACH: Quote, Profile, Research)(601600.SS: Quote, Profile, Research) up 3.37 percent to 38.98 yuan as Shanghai copper and zinc futures surged for a second day. Recently listed China Railway(0390.HK: Quote, Profile , Research) (601390.SS: Quote, Profile , Research) jumped 6.22 percent to 10.59 yuan after soaring its 10 percent daily limit on Thursday. Shanghai Securities News reported this week that the firm would play a big role in building a planned railway linking Shanghai and Beijing, a project worth some 100 billion yuan. Reuters

BEIJING, Dec 21 (Reuters) - China may again experience a fuel shortage in 2008 if Beijing maintains a tight lid on domestic oil prices, an industry association said, a situation likely to keep the country’s diesel imports high.

The world’s second-largest oil market suffered through widespread diesel rationing in October and November, after refineries cut output to stem looses as global crude prices surged above $90 a barrel.

“If refined oil prices are not freed up and crude prices stay high, private refineries will continue to stand and watch, leaving the supply burden on two state companies,” the China Petroleum and Chemical Industry Association said on its Web site www.cpcia.org.cn.

“New refining capacity will not be ready immediately, (existing) plants are unable to carry out thorough maintenance, making safe operation the weakest link in the supply chain.”

CPCIA has the support of retired top executives of state oil giants Sinopec Corp (0386.HK: Quote, Profile, Research) and PetroChina (0857.HK: Quote, Profile, Research), the Web site shows.

China’s independent oil processors, supplying 10 to 15 percent of the country’s 7.5 million barrel-per-day market, had cut production drastically, a main factor behind the supply squeeze that eventually forced Beijing to raise pump prices in November, the first increase in 17 months.

State refiners had to boost diesel imports to nearly record levels, second only to the United States, supporting global prices at a time of peak winter demand. (For details see [ID:nSP24624]) (Reporting by Chen Aizhu; Editing by Edmund Klamann)

Reuters
Happy Holidays,

Marketswimmer

Tuesday December 18, 5:44 pm ET

SALT LAKE CITY, Dec. 18 /PRNewswire-FirstCall/ — Overstock.com, Inc. (Nasdaq: OSTK - News) announced that today, after 669 consecutive trading days (and 709 total trading days), it has dropped off of Nasdaq’s Regulation SHO threshold list. (Source: http://www.nasdaqtrader.com/aspx/regsho.aspx).

Regulation SHO requires the stock exchanges to publish daily a list of companies whose stock has failures-to-deliver above a certain threshold. It also requires mandatory close-outs for open fail-to-deliver positions in threshold securities persisting for over 13 days, with the aim that no security would appear on the threshold for any extended period. Despite that aim, since April 22, 2005, Overstock has continuously appeared on the Regulation SHO threshold list — until today.

“I’m pleased that we’re off the list and hope that our efforts to reform the Regulation SHO are a contributing factor. However, we’re eyeing this news with caution,” said Overstock senior vice president, corporate affairs and legal Jonathan Johnson. “After 40 consecutive trading days on the list, we briefly dropped off the list in the spring of 2005 before starting our 668 day run, so we’ll have to wait to see if this is a more permanent development.”

Along with business groups, members of Congress, investors, academics, and other companies, Overstock has repeatedly called for the SEC to reform Regulation SHO. Specifically, Overstock has urged the SEC to adopt the “G.O.L.D.” standard in Regulation SHO reform: “G”: eliminate Regulation SHO’s “G”randfather clause; “O”: eliminate Regulation SHO’s “O”ptions market maker exception; “L”: require short-sellers to “L”ocate and borrow shares before selling them; and “D”: require the exchanges to “D”isclose fully and promptly the aggregate failure-to-deliver positions for every threshold list company. To its credit, the SEC has eliminated the grandfather clause. However, the SEC has been slow to consider the remaining necessary reforms.

While Overstock has dropped off of the Regulation SHO threshold list, 377 companies remain on the list: 160 for over 13 consecutive trading days, 32 for over 100 consecutive trading days, and one, Medis Technologies Ltd., for 596 consecutive trading days. (Source: http://buyins.net/tools/short_list.php?ssd=20071217).

“This development is encouraging,” said Overstock chairman and chief executive officer Patrick Byrne. “However, I remain open to the possibility that the miscreants have figured out a way to shift illegal unsettled trades outside of the DTCC using ex-clearing transactions which the SEC (displaying its customary deference to criminal elites) has said that Regulation SHO does not apply.”

About Overstock.com

Overstock.com, Inc. is an online “closeout” retailer offering discount, brand-name merchandise for sale over the Internet. The company offers its customers an opportunity to shop for bargains conveniently, while offering its suppliers an alternative inventory liquidation distribution channel. Overstock.com, headquartered in Salt Lake City, is a publicly traded company listed on the NASDAQ Global Market System and can be found online at http://www.overstock.com.

Overstock.com® is a registered trademark of Overstock.com, Inc. All other trademarks are the property of their respective owners.

This press release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements include, but are not limited to, statements regarding whether the company will reappear on the Regulation SHO threshold list and whether unsettled trades are occurring outside of the DTCC in ex-clearing transactions. Our Form 10-K for the year ended December 31, 2006, our subsequent quarterly reports on Form 10-Q, and our other subsequent filings with the Securities and Exchange Commission identify important factors that could cause our actual results to differ materially from those contained in our projections, estimates or forward-looking statements.

The Education section (click menu bar Education) has been updated. New materials: Option Trading.

Please visit my site at http://education.marketswimmer.com

read more | digg story

It’s long overdue, I will initiate a series of discussions regarding trading strategies, hope you all will tune-in.

A few days ago I met with Vince Rowe, a radio show host and business owner in Texas, in a evening. He presented one of his trading strategy - “Lead Dog Theory” to the audience. He also commented that for a day trader, you have to know your stocks well. This includes to find the “lead dog” in your Level-II screen and to know which technical indicator the big guy is using. “Lead Dog is the Lead Underwriter for IPO in technical term. The government database Edgar.gov is the place to find the relevant information. However in practice the government database is very crowded and very confusing if you don’t know which form to look for. I found an easy way to search for the lead dog. For instance, in one website, you just input the CIK number for AAPL, after a few clicks it will return Margan Stanley as the lead dog, which I know for sure is correct.

If you are interested in finding the “lead dog” for your stocks, please leave a comment or contact me with the contact form, so we can help each other and find the winning trading strategies.

Thanks,

Market Swimmer

Smart money has never abandoned the stock market, small investors and the alike just got scared from sub-prime crisis. Recent stock market drop may be a buying opportunity for us. 

If you missed CSIQ 26.7% jump today, don’t worry. Solar Energy is hot, as long as oil is around $80 per barrel, this section will continue to perform well. Other Solar Energy companies include SOLF, JASO and STP.

Congress passed energy bill today, which mandates blending more ethanol into the gasoline pool. An ethanol company, PEIX has been performed well recently, smart investors have already increased their holdings before the news release. You have to wonder why the oil went from $50 to $90 and PEIX went from $40 to $8 ($4.25 a few days ago), a lot of gowth potential here.

Chinese ADR’s, TCM, LFC, PTR, KONG are all cheap now.

Enjoy,

Market Swimmer

Every Friday CFTC (Commodity Futures Trading Commission) publishes Commitments of Trades reports (commonly known as COT reports) at it’s government official website — www.cftc.gov. From these reports we can learn how the big guys (or Smart Money, a term refers to the institutional investors such as Goldman Sachs) take their positions on the futures market. In the old days, the COT reports mostly covered the commodity market, including gold, silver, oil, sugar, etc. However nowadays the reports include all the major indexes trading in the US stock market and much, much more. These reports were only available to some wealthy investors before. The government made them available free of charge to general public since 1995 in an effort to avoid market manipulations (by the big guys), and increase transparency of the market. However the general public have not been able to take advantage of this valuable information source because the government reports are pretty much “reader-unfriendly” as usual, people can not get much out of them.

Recently I can see the growing awareness of COT reports, several authors on the internet (include myself) started publishing some information of COT reports and commercial position changes. I personally believe that the commercial traders are investors with most up to date information, best research teams, and most of all, they have the most resources to impact the market. Not only that, they literally control the market direction. Therefore, following the Smart Money is one of the most profitable strategies. In order to simplify the process of data analysis, I compile a table which contains commercial net position (long minus short) changes for the most influential indexes every week:

           *These are the net commercial positions  of Tue. 11th published on Friday 12/14.

I also try to add my interpretations to it, gather other people’s opinions and publish them on this website, hope all of us can benefit from this set of data. For instance, from this week’s data, we can see that although we had a crazy week, but the commercial investors added long positions in all four major indexes, I consider it as a positive development. Percentage wise Nasdaq got the most lift from the prior week. For instance, on 12/14 report the commercials increased their net positions from 8359 to 9253 contracts, the difference is 894. Again, 9253 is the net position, which means they had 35,628 long and 26,375 short, the long - short = 9253. Don’t underestimate the number of (9253) contracts, because it cost them $100 per each point of Nasdq, so 9253 contracts amounts to $2,453,895,600 in dollar value, that is a 2.4 billion dollars positive bias! Just to give you a rough idea, the commercials are having $40 billion worth of net positions in all 4 indexes (including large and mini) right now. I will generate a historical changes in net positions in dollar value if you guys think it’s worthwhile.

Some other market developments:
** Gold is consolidating in a symmetrical triangle pattern,
    while the COT chart improved slightly over the last few
    weeks but overall remains bearish.
    On one hand the technical pattern supports a breakout,
    while the COT setup leans towards a breakdown.  So it
    only makes sense to wait for a market confirmation.
    Support is at around 780 with resistance near 820.
** The US Dollar has put in an impressive rally over the
    month or so, and what is interesting here is that
    commercials have taken this opportunity to sell
    this index.  While I would respect the current uptrend,
    the COT chart does suggest that the current move is
    an over-sold bounce - as the intermediate to longer-term
    downtrend remains intact.
** Oil’s COT chart looks constructive especially when you
    consider that oil is trading in the $90 range…

It looks like the market will have a slightly positive bias in the next few weeks, and the commercials reduced their short position on crude oil. My guess is that it’s a good opportunity to look at the solar energy sector. Last time I recommended CSIQ, if you take my advice, you could have made more than 10% return in a few weeks.

I plan to form a COT/Solar Energy community, I will use my neural network program to select a few winners and ask you all to make comments and invite you all to join the conversation. Please check my “Recent Picks” section often.

Market Swimmer

Wall Street was disappionted at FED’s  25 basis point rate cut and investors started dumping their shares, causing 300 points ups and downs on the Dow. But Main street is looking okay, the newly released holiday sales number is good, 1.2% jump which is the best in 6 month. Lehman Brothers reports record net revenues and earning beats the Wall street expectation. So what went wrong? When we are confused, we should look at how the big guys digest the news and how to put their bets.

My computer contracted some kind of virus and haunted me for a week, and I missed the COT report, which basically indicated that the institutional investors (smart money) increased their holding on S&P — we can see the result in the pre-FED announcement the market was up; at the same time those guy mysteriously bought a lot of call option contract for VIX index — which prepared them to dump shares after the FED announcement. The headline showed up in the media was Fed only cut interest rate by 0.25, instead of 0.50 the market expected. Did the Smart Money know this ahead of time or their computer was so good that allowed them to calculate the odds for this to happen and formulated the winning strategy accordingly? I don’t have the answer to this and your guess is as good as mine. But the fact is the fact, the clue was there, everything happened just like they follow the script. Amazing, isn’t it?

A lot of the volatility was caused by the institutional program trading and day traders following suit, so don’t worry about them too much.

Oh, another thing, the Smart Money also reduced their short positions on oil (or bought oil contract), predicting that the cold weather would sweep the Mid-West, which let the Oil price jumped at least $5 to plus $90 per barrel.

If you like the data and graphs, please leave your comments and I will post them later.

Here is the table of Commercial positions published on Dec. 7th of 2007:

Thank you and I am open for discussion on the resutls

Market Swimmer