Friday, November 26, 2010

26 November 2010 Short But Not Short Enough


26 November 2010 Short But Not Short Enough

Yeah, today was a shortened trading session. It could have been a lot shorter as far as we were concerned. We lost almost a point in most of the indexes. Let’s just write it off to an overdose of triptophan. The initial retail feedback about Black Friday was positive, but rockets flying in Korea, sovereign debt issues in Europe, and a lost shipment of spent nuclear core rods caused a correction from our Thanksgiving Eve faux Rally. The metals sector which has been the work horse of the last rally is even slipping. Oh yeah, Vector vest finally agreed with my November 12 call that the rally is over.

The IBD declared we are officially in a correction (Dah!). Keep an eye on two numbers. The Dow, which closed today at 11,092 is coming precariously (love that word) close to its 50 day moving average. If it drops through, its next technical resistance is about 9950, its August low. The other number is the same comparison for the S & P 500 (The Index we watch closely). It closed today at 1,189. Its 50 day moving average is 1,174 and it also has an August low of 1,039 as its next major resistance point.

Next week will be a busy economic week, but I must wait for this weeks Barron’s to be released later tonight before we rattle on about that.

So how do you play this. As we suggested on Wednesday, just be patient. Have you stops in place. Take your profits when you want. In a conservative to moderate portfolio, I would not be buying anything in this correction.

Those wanting to live dangerously, Play the VXX (the iShares ETF for the volatility play). But I caution you that I have missed timed this about three times in the last six months and got burned. I have not been as patient with this play as maybe I should.

Here are a few to do homework on. TIFF Tiffany & Co., through its subsidiaries, engages in the design, manufacture, and retail of fine jewelry. Its jewelry products include gemstone jewelry, gemstone band rings, diamond rings, wedding bands for brides and grooms, non-gemstone, gold or platinum jewelry, and sterling silver jewelry. The conservative management team was talking up expected holiday sales and some sexy numbers for 2011. Remember CEOs are normally conservative and do not want to disappoint. So when a conservative management team is give positive earnings guidance, it is usually a good thing. DO YOUR HOMEWORK.

AMZN, Amazon jumped up today as CommScore research showed an unexpected hike in on line retail sales and trends. This was good for us who are long and holding 60-90 day call options. If you want to see something sexy, go to almost any interactive charting tool and overlay a one year AMZN Chart with a 50 day, 100 day, and 200 day simplified moving average (aka SMA). That is sweet. Those three lines heading up simultaneously combined with decent volume (today’s valume for AMZN was huge) create a hard to reverse momentum. I would guess we will see more and more institutional monies coming in over the next few days. It is not too late, but if this is a trade and not an investment, play a march or April call just out of the money. (If anybody wants a more detailed explanation, drop me a note at

GES Guess?, Inc. designs, markets, distributes, and licenses lifestyle collections of apparel and accessories for men, women, and children. It offers collections of denim and cotton clothing, including jeans, pants, overalls, skirts, dresses, shorts, blouses, shirts, jackets, and knitwear. They also increased 2011 earnings estimates from 1.02 a share to 1.06 a share. The stock has done well over the last tow day, but I do not think all the big houses are done moving their monies into this stock. The margin of safety has dropped a lot over the last few days. However remember the margin of safety is the difference between the current price and the analysts average target price. As this new earnings guidance gets digested, we should see some bumps in the target prices.

Disclaimer: at this moment we DO NOT OWN TIF and GES. WE DO OWN AMZN AND AMZN OPTIONS.

In times like this, its good to get a good book and try and read about investing, money management, economics, or

Well, try and read a good book!

Salve Lucrum


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