The markets were mixed this past week with slight gains in the large-caps, but small-caps took a beating.
This is either a sign that a pullback is in the works (and much needed) as small-caps drag down large-caps or this will pass soon and the large-caps resiliency will keep us afloat. I don't predict, I trade what is in front of me. That said, I am very happy to see some weakness in small-caps and looking forward to better opportunities.
This weakness is resetting some of the charts and I would not mind further weakness to finish the process. The weakness creates opportunity for us and after many bullish months, this would actually be helpful to the bulls. At that time we can see more stocks surging higher rather than a slow grind higher that doesn't net as high of a return.
Again, per my comments a few weeks ago, I am going to have to keep my posts short for the near-term. I have recently purchased a restaurant and my time as a trader has now been reduced for the near future. I hope to be trading full-time again as I can get this restaurant into an easier-to-handle maintenance phase.
Everything this week is based on the all-mighty Non-Farm Payroll. This report has become so important that it could actually set the tone for the next month. The headline number is important for the markets and psychology of investors, but the real key to understanding these numbers is the labor participation rate. The labor participation rate keeps decreasing which in turn makes it easier to reduce the headline unemployment. Others have noted, and I have not confirmed this myself, that if the labor participation rate decreases just a few more percentages, it would mathematically make the unemployment percentage go negative. The point of this is to put in question how accurate this data really is in regards to our true employment situation. However, the markets care more about the headline and less about the specific details.
| Date | ET | Release | For | Actual | Briefing.com Forecast | Briefing.com Consensus | Prior | Revised From |
|---|---|---|---|---|---|---|---|---|
| Mar 05 | 10:00 | Factory Orders | Jan | -2.3% | -1.9% | 1.1% | ||
| Mar 05 | 10:00 | ISM Services | Feb | 57.0 | 56.0 | 56.8 | ||
| Mar 07 | 07:00 | MBA Mortgage Index | 03/03 | NA | NA | -0.3% | ||
| Mar 07 | 08:15 | ADP Employment Change | Feb | 250K | 220K | 170K | ||
| Mar 07 | 08:30 | Productivity-Rev. | Q4 | 0.8% | 0.9% | 0.7% | ||
| Mar 07 | 08:30 | Unit Labor Costs – Rev | Q4 | 1.1% | 1.1% | 1.2% | ||
| Mar 07 | 10:30 | Crude Inventories | 03/03 | NA | NA | 4.160M | ||
| Mar 07 | 15:00 | Consumer Credit | Jan | $10.0B | $13.4B | $19.3B | ||
| Mar 08 | 07:30 | Challenger Job Cuts | Feb | NA | NA | 38.9% | ||
| Mar 08 | 08:30 | Initial Claims | 03/03 | 355K | 355K | 351K | ||
| Mar 08 | 08:30 | Continuing Claims | 02/25 | 3450K | 3405K | 3402K | ||
| Mar 09 | 08:30 | Nonfarm Payrolls | Feb | 250K | 207K | 243K | ||
| Mar 09 | 08:30 | Nonfarm Private Payrolls | Feb | 275K | 220K | 257K | ||
| Mar 09 | 08:30 | Unemployment Rate | Feb | 8.3% | 8.3% | 8.3% | ||
| Mar 09 | 08:30 | Hourly Earnings | Feb | 0.2% | 0.2% | 0.2% | ||
| Mar 09 | 08:30 | Average Workweek | Feb | 34.5 | 34.5 | 34.5 | ||
| Mar 09 | 08:30 | Trade Balance | Jan | -$48.0B | -$48.1B | -$48.8B | ||
| Mar 09 | 10:00 | Wholesale Inventories | Jan | 0.6% | 0.6% | 1.0% |
Due to the weakness in small-caps recently, I have moved closer to cash and waiting to redeploy more. Instead of trying to call a bottom, I will wait for confirmation of upside to deploy capital in a safer environment.
Everywhere I look, people expect more upside it seems. This is different than previous weeks when the fear of downside kept us moving higher as everyone was prepared. That said, I will not be looking to call a bottom, I will simply stay patient and wait for clarity in small-caps. As the days move on, I see more and more signs that weakness is growing. Until that changes, I will be mostly in cash trading smaller positions.
If you can't make it to the live-chat where all the magic begins, you can view my real-time trade updates throughout the day by following me on SeekingAlpha StockTalks.
I am sticking to stocks showing overall relative strength for my swing trades. Preferably, these companies have more cash than debt and valuations showing reason to believe it is undervalued, but more homework is needed to sort through the list. If they have upcoming earnings, I may not trade until after the earnings. My style does not allow me to hold swing trades into earnings unless I am only holding “profits” into them.
I look for these stocks to pullback towards favorable support levels (the price area designated next to the stock below) where I can start to buy incrementally if the conditions feel safe upon reaching the support area. Again, the price target is just an area of interest, it is not a firm buy just for touching it.
I am cautious of buying on breakouts unless I am in a very aggressive mode. This aggressive mode may be just for a day-trade rather than risking the large position overnight where my stop-loss may not protect me from a large gap-down. Market players have been reluctant to buy stocks on breakouts over the past year and I have adjusted my strategy to be more selective and patient. If we can gain some very positive sentiment or a QE-based environment, I'd expect that will change. The first list is my normal weekly radar using my proprietary settings on my stock screener. For all my radars, I tend to keep four weeks worth before deleting them allowing me to rotate through a greater number of recently bullish stocks.
AsiaInfo-Linkage (ASIA) – $12.50
ATP Oil & Gas (ATPG) – $8
BioCryst Pharma (BCRX) – $4.25 to $4.50
CIGX)">Star Scientific (CIGX) – $3.50 to $3.75
Majesco Entertainment (COOL) – $2.50
Carrizo Oil & Gas (CRZO) – $27.50
Cal Dive International (DVR) – $3
8×8 (EGHT) – $4.25
Endologix (ELGX) – $12.50 to $13
END)">Endeavour International (END) – $10.50
Exterran Holdings (EXH) – $13.75 to $14
Goodrich Petro (GDP) – $16.75 to $17
GLUU)">Glu Mobile (GLUU) – $4
GMX Resources (GMXR) – $1.50
Imperial Sugar (IPSU) – $5.75
Key Energy Services (KEG) – $17
Kodiak Oil & Gas (KOG) – $9.50 to $9.75
Leap Wireless International (LEAP) – $10.50
Lucas Energy (LEI) – $2.50 to $2.75
McMoRan Exploration (MMR) – $14
Pharmacyclics (PCYC) – $25
Raptor Pharma (RPTP) – $6.75 to $7
Sangamo Biosciences (SGMO) – $4.75 to $5
STEC (STEC) – $9.50
TiVo (TIVO) – $11.25
Voyager Oil & Gas (VOG) – $3
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The second radar is the short squeeze radar which is compiled of stocks showing relative strength, but having high short interest (you will notice duplicates among both radars because of this). Any bullish spark may set them off in a short squeeze run netting significant profits if you trade correctly. Always trade these short squeeze candidates carefully as stocks with high short interest will have negative rumors swirling around them trying to shakeout investors who have not done their homework. However, some of those rumors may indeed be true, hence the importance of doing homework and being very selective. The risk is higher for these types, so make sure you know what you are getting into before you buy, not after you buy. The key is to be selective and find those stocks which the shorts are wrong about, not to blindly believe every high short position is wrong.
Amkor Technology (AMKR)
Aeropostale (ARO)
AsiaInfo-Linkage (ASIA)
Briggs & Stratton (BGG)
Brown Shoe (BWS)
BYD)">Boyd Gaming (BYD)
Corinthian Colleges (COCO)
Carrizo Oil & Gas (CRZO)
Cenveo (CVO)
Endeavour International (END)
FTK)">Flotek Industries (FTK)
Glu Mobile (GLUU)
Harvest Natural Resources (HNR)
KOG)">Kodiak Oil (KOG)
Northern Oil & Gas (NOG)
SWC)">Stillwater Mining (SWC)
Take-Two Interactive Software (TTWO)
Uranium Energy (UEC)
Veeco Instruments (VECO)
Wabash National (WNC)
W&T Offshore (WTI)
ZAGG (ZAGG)
Zoltek (ZOLT)
You can follow my trades alongside the 36,000 plus market players who follow me on SeekingAlpha (Shameless promotion). As always, do your own homework to see if you agree. Good luck out there.
Mike
At the time of publication, Kudrna was long ATPG, but positions may change at any time.
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Tags: Boyd Gaming (BYD), Economic Calendar, Endeavour International (END), Flotek Industries (FTK), Game-plan, Glu Mobile (GLUU), Key Energy Services (KEG), Kodiak Oil, Kodiak Oil (KOG), Michael Kudrna, short squeeze, Star Scientific (CIGX), Stillwater Mining (SWC), Stock Radar, unemployment rate, Voyager Oil & Gas (VOG), Weekly Homework
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