The mixed signals continue…

The NAZ has broken out on its Daily chart and is close on its Weekly.  However, both the DOW and S&P are not that close yet, and both are also looking weaker on their longer term trends.

With the NAZ leading the way the question becomes can it drag the others along with it, or… will the LT overhead resistance of the DOW and S&P doom the rally.  We think at this point that we will likely have to wait for earnings next month before this picture becomes clearer.

It looks like mostly sideways action for the near-term.

Coach BD

Though the market rolled over into the close today the recent action has been generally positive.  The NAZ & S&P are generally looking better than the DOW but all are holding above their respective Daily & Weekly trends.

We are still looking for a VIX entry as a Mid-Term Portfolio hedge and at the 19 level we think this is an excellent entry point.  At this level we are confident that the downside is limited while there is a good opportunity for a substantial upside move prior to earnings season next month.

Coach BD

The averages rallied quite strongly into the close today, erasing much of the day’s early losses, however, none of them managed to close above the overhead resistance of the 40 & 50-Day MA’s.

Subsequently, we held off on our planned adjustments and VIX entry until we see if today’s late strength carries over into tomorrow.

Coach BD

Close

The DOW closed just below its 50-Day MA, on weakening volume from yesterday’s negative close.  We suspect that the markets may move sideways with these flat 20, 40 & 50-Day MA’s over the near-term.  We will begin entering and adjusting existing positions for maximum income generation starting tomorrow.

Unless there is a clean BO tomorrow we will enter a new VIX hedge with Long AUG Calls and Short MAR Calls.  We will post specifics in the a.m.

Coach BD

*

Midday

The DOW is flirting with its 50-Day MA in an attempt to break back above this continuing resistance.  In order to make any significant progress to the upside it will need to take out the recent highs near 10,438 and then BO above the highs set in mid-January near 10,750…

If the DOW doesn’t break cleanly above the 50-Day look for sustained weakness or, at best, sideways action over the near-term.

The Weekly outlook remains generally bullish but the Monthly trends remain generally bearish.  Without any clear catalysts to drive the markets one way or the other this environment lends itself to tight hedges and more aggressive income generation strategies.

Coach BD

Midday

This is the kind of rebound action we’ve been looking for.  Now we will see if there is any conviction on the buy side whatsoever.  It appeared earlier that the averages may be rolling over but they have stabilized so let’s hope we make another run higher from here.  Still, the DOW is more than 200 points from challenging its downsloping 20-Day MA so there a lot of hard work, and resistance, ahead.

Our feeling remains that any rally into resistance will signal SHORT entries and a VIX hedge entry.

Coach BD

It was brought to my attention that some of you may not understand my discussions of overhead resistance in evaluating the current market conditions.

First, on a Daily chart of the DOW (for example) with corresponding 20, 50 & 200-Day MA’s set on your chart “studies”, you will see clearly that the DOW broke through “support” on increasing volume on 1/21 & 1/22.

Since that time, all of these trends (20, 50 & 200-Day MA’s) now represent overhead resistance to the prospect of the DOW moving higher, especially given that the controlling trend… the 20-Day… has rolled over and has broken below the 40 & 50-Day MA’s.  This type of action is called a bearish crossover and historically indicates sustained short-term (ST) weakness.

From a Weekly perspective, the DOW has been in a bearish pattern since the Week of June 23rd, 2008 when it broke below its 200-Week MA and has not made a single attempt to break back above this longer term trend since that time.  In addition, 2 weeks ago the DOW broke below its 20-Week MA and now that trend appears to be rolling over to the downside.

From a monthly perspective, since the DOW broke back above its 200-Month MA in June of 2009 it climbed for 6 straight months… however… since breaking back above its downsloping 20-Month MA on relatively weak monthly volume, the DOW has weakened as it has approached its downsloping 50-Month MA, without making any significant challenge of that long-term (LT) trend, which currently resides at roughly 11,150…

All of these indications has caused us to conclude that we may be headed for at least a ST correction without any clear catalyst to drive the averages higher.

If you have any questions please send those along.

Coach BD

Friday offered a glimmer of hope in an otherwise bad market.  There was a high volume reversal ending the day at the top of the day’s range on all of the major averages.

However, until we break back above the ST trends which are in the process of rolling over, we will be happy to be observers, with 2 exceptions…

If the market rallies back up into resistance and fails to breakout we will likely initiate positions on the short side using the QQQQ’s and a corresponding VIX hedge which we intend to sell monthly premium against for income generation.

We have used the VIX successfully as an effective portfolio and market hedge over the years and the current market conditions appear to be setting up nicely for a VIX entry.

Coach BD

We don’t like what we are seeing right now and it appears we may be headed for a significant correction.

The ST 20-Day trend has rolled over and is crossing the 50-Day MA on the way down.  This is called a Bear Cross is, obviously, a bearish sign.

We are also bumping up against LT resistance on both the Weekly and Monthly Trends which are both still leaning bearish.

We see possible downside risk to ~9,000 on the DOW if we don’t break back above the reisdent resistance just above current levels.  Everyone check out the Daily, Weekly & Monthly trends and evaluate whether or not you agree or dissent.

Coach BD 

BOOM……!!!

Something very significant has happened that has caused MICRON to ask for an emergency continuance of the At Trial.

THE PROBLEM… We don’t yet know what the hell it is.  Rereading many posts that are being reviewed at Investor’s Village RMBS Message Board… most seem to think that either Samsung & Hynix have settled… OR, MICRON wants to settle first…

Everybody up early tomorrow… The BIG show starts tonight or tomorrow morning.

YIKES……!!!

Coach BD

Well………………….

I am happy to finally be able to report…

The Trade Coach is back at work full-time for the first time since October.  For those of you who use our Private Trade Execution Services, you all know that Coach BD has been busy taking good care of all of your portfolios and we can report that RMBS, SNDK, AAPL, ESRX & The VIX were all MONSTER trades for 2009, with SNDK, AAPL & ESRX needing close to no adjustments or action for most of the year.

That was simply because these trades were carried over from 2008 and all were either already profitable or close to zero carry trades, through very effective hedging in 2008.  This gave us the luxury of simply holding them through this past year, risk free.  The ultimate, and perfect trade scenario.

For some of you who got in early w/us on TSRA, that was another very good result, though if you waited for either of the add-ons to open your initial position, you are probably near breakeven (BE) or even down 10 - 20% on that trade… BUT fear not, for those of you who are holding TSRA we will be trading this position for Income over the next few months waiting for the HUGE potential move in RMBS to drag TSRA along.

Finally, we made very big returns on the VIX early in the year and then SOLD ATM premium against our Long OCT Calls through JULY, when we exited, leaving us with another year of very big gains using the VIX, though unlike 2008, when high volatility reigned, 2009 was a hedge against our hedge trade as we sold 5 straight months of ATM Premium, collected it ALL, and then sold our core OCT Calls for just $1.00 under our Cost Basis @ JULY Expiration.

So, where does that leave us…

We will be exiting AAPL & ESRX @ JAN Expiration.  We SOLD ATM & near OTM Premium against these for JAN because we thought these runs may be coming to an end, and we wanted to hold these into this year so we won’t have any tax reporting, or tax paying, until next year (2011)…  SWEET…!!!  SNDK will fall into that same boat though we intend to roll out our JAN Expiring Calls that we have held since 2008, and we will be trading those out for JAN 2012’s.

For those who remember our past discussions, SNDK has been one of our favorite LT Trades almost every year because of the huge runs this stock routinely makes in both directions.  We feel that this upside run in SNDK may continue through this whole year as SNDK has reestablished itself as the Gorilla in its market.  Since JAN 2006, SNDK has been making a nice LT cup formation from its highs near $80, and now that we have a new, strong uptrend building the right side of the LT Cup, $80 may be in play once again over the next year or two (thru 2011).

We’ll address our outlook for RMBS and TSRA in a separate post because there is just so much to talk about with RMBS… (so what else is new)… BOTTOM LINE… Hang onto RMBS, and TSRA, for now cuz the storm is comin.  This strong move we’ve made from the NOV 2008 lows near $5 to where we are now, near $23.50 will seem like a blip on the chart if Samsung rolls over and settles with RMBS prior to the AT Trial scheduled to start next week.  If that happens, or if anyone else jumps in to settle ahead of Samsung, we could easily see $60, perhaps even $80 - $100 before the year is out.

YEEEEEEEEEEEHAAAAAAAAAAAAA…………….!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

It really could be the MONSTER GORILLA trade of the decade, if not the Century, should the dominos start to fall.  Once they start falling there’s no telling how high RMBS may go.  We believe that RMBS is perhaps a $10 - $25 BILLION dollar company in market cap, especially if settlements and licenses start rolling in this year, as we expect they will… so that’s anywhere from 5 - 10x its current price.  YIKES…!!!  The estimates are truly mind-boggling.  We’ll be happy with $60, but $80 - $125 is certainly in the ballpark, just for this year…!!!

BUT, then again… its still RMBS… So anything can, AND WILL, happen.  We’ll talk more about the outlook tomorrow along with our strategy.

Everyone have a great evening.  It is so very good to be writing once again.

Coach BD