Dec 31, 2007 - Issue #091
Deja-vu? Déjà-vu? (since computer files can't handle accents yet).
Notice the bulge in the consolidating category. With only one more trading session
before we put '07 into the record books, the stage is being set for the upcoming year.
Mutual fund portfolio managers have been actively engaged in that most important annual
ritual known as 'window dressing' in order to look good for their year-end statements.
Perhaps our friends at CNBC can find out just how much 'window dressing' has taken
place this year?
What should we expect, marketwise, in '08? In my judgement, a lot of volatility!
Which usually translates into declining markets.
However, rather than a stock market, never forget that what we deal with is a market of
stocks (as well as futures, options, and currencies). As 'serial opportunists' (thank
you, Sam Zell), the financial 'tools' exist to enable us to exploit whatever
'opportunities' the markets present. Here's a clue: MarketClub???
Case in point: JNJ.
Does the market have an objection to JNJ at 70? Twice in the last two years, the stock
came close but backed away and presented beautiful 'swing' trades to the downside.
Apr '05, JNJ peaked at 69.99 before bottoming out at 56.65 in Feb '06.
Oct '06, JNJ peaked at 69.41 before bottoming out at 59.72 in Jul '07.
Dec '07, JNJ peaked at 68.75 (???). Currently at 67.38, Déjà-vu?
A limited low risk bearish trade might be put on utilizing derivatives with a view to
closing out the position at, for instance, 68.51 stop. Risking less than 2% (approx).
If JNJ is going to take out 70, make 'em prove it!
The downside swing (should it appear) should yield at least triple the initial risk in
order to be a favorable risk/reward scenario.
Dow score card for the week ending 12/28/07.
DJ-30: 13365.87 -84.78 -0.63%. The Real World DJ-30: 54.81 -0.34 -0.63%.
UP: 10, Down: 20.
Trends (weekly charts): This is the subjective part.
Rising (Generally Higher Highs/Higher Lows) 6 (-8) 20%:
HON, HPQ, +*IBM, MSFT, +*T, XOM.
Consolidating (Generally Lower Highs/Higher Lows) 19 (+12) 63%:
+*AA, +*AIG, +*AXP, +*BA, +*CAT, +*DD, DIS, GE, +*HD, -*INTC, _*KO, -*MCD, MMM, -*MO,
-*MRK, -*PG, -*UTX, -*VZ, -*WMT.
Declining (Generally Lower Highs/Lower Lows) 5 (-4) 17%:
C, -*GM, -*JNJ, -*JPM, PFE.
+/- denotes change of direction.
* denotes change of category.
Comments? Ideas? Feedback? Let me have it, right between the eyes! I'd love to hear from you. Just reply to this zine and tell me what you think!