Day Trading Thoughts For Fri. Mar. 13

Discussion in 'Trading' started by erikrkolodny, Mar 13, 2009.

  1. erikrkolodny

    erikrkolodny ET Sponsor

    The American Association of Individual Investors (AAII) focuses on the individual investor rather than professional traders or institutional investors. The organization has a poll which has been published for a very long time in which the AAII’s members are asked whether they are bullish, bearish, or neutral on the stock market for the next six months. Typically, the indicator is quite contrary in nature since the thought is that herd mentality is the opposite way to go. Put another way, if everybody has sold every share of stock they want to sell because they think the equities will go down, there is nobody left to sell ergo the market rallies. Since 1987, the mean four week average for the AAII according to Sentiment Trader has been 38% bullish, 28% bearish, and 34% neutral. Approximately 95% of the readings have bullish sentiment at the 41% to 81% level which means that 5% of the time (or about three times a year), bullish sentiment should dip below 41%. Well, guess what happened in the latest survey:

    http://www.sentimentrader.com/subscriber/charts/WEEKLY/SURVEY_AAII_BULLS.htm

    Yep, you guessed it. The lowest bullish rating and the higher bearish reading ever recorded occurred in the latest survey (3/4/09) with approximately 19% of the poll participants bullish and just over 70% bearish! These are stunning numbers. Now, it is sheer folly for me (or anyone) to blindly call a bottom, but this is an indicator that at minimum, this market is very overdue for a bounce of some sort. For day traders, the implication is that the days of shorting a financial stock and snoozing for the day are likely close to over if not completely eradicated. Thus, do not have a bias going in to any given day’s trading- and certainly do not be stubborn because the volatility we’ve been having will likely be a bit more two-sided in days to come as it’d appear much of the most severe selling has already occurred based on this AAII reading if nothing else.

    Markets continued their weeklong rally overnight. Asian markets rose 3% to 4% across the board with European bourses up 2% on average. Bonds are getting hit very hard in the early-going. Futures are indicated higher as well. There is no real reason to believe this rally will stop today if for no other reason than everyone else thinks it will. It likely will not continue with the same ferocity, but with C overnight saying it does not need any more government money, there should be an underlying bid. There may likely be one little profit taking wave today, but look for a quieter more choppy day with select strength with, once again, financials as the benchmark should my hunch be incorrect.


    Reiterating-Please understand that if the ideas do not get to the hoped for set-ups cited below, more often than not, one should not blindly trade the symbol next to said idea. If the whole story is not there -If something is good, assume either a short thru unchanged or an A-B-A2 based on direction of the market unless specifiedIf something is bad, assume either a buy thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified-

    Good- The following stocks have good news and/or a strong technical pattern

    HIBB- raised earnings guidance

    SEH-closed near high of day

    MS, GS- among brokers closing near highs of day

    PRU, AFL, MET- insurers as a group helped lead the market rally yesterday

    MHS, ABC, AET- healthcare stocks turned around yesterday sharply

    MW- closed near high of day amid good earnings

    JPM, WFC, PNC, USB – banks once again led the rally yesterday

    NFLX- broke to a new trend high yesterday; looking to buy thru yesterday’s 40 high

    WTFC- closed near a high

    APA- among the oil stocks which closed near their highs of the day

    SGR- closed near high of the day

    JEC- stampeded higher and closed near day’s high

    SPG, DRE- among REIT’s which continued the week’s monster rally

    SFD- closed near its high after posting terrific earnings

    Bad-The following stocks have bad news and/or a weak technical pattern

    ARO- beat on quarter; warned on outlook

    ZUMZ- lowered earnings guidance

    AA, BBT- on Sell Block segment of “mad Money” last night

    PPD- mentioned very negatively in an article by Minkow in which he claims that there is a great deal of fraud occurring at the company

    Earnings:

    FRI MAR 13 BEFORE

    AZ E SUI

    Good luck today.

    Erik R. Kolodny
     
  2. ttonca

    ttonca

    Thank you Erik for the post, it is much appreciated:)