Centrifugal Deforest

Night Gallery (leaders of men)

noreply@blogger.com (Michael Davey) — Sat, 07 Jan 2012 17:56:00 +0000

The Big Picture - Year in Pictures

noreply@blogger.com (Michael Davey) — Wed, 21 Dec 2011 22:30:00 +0000

The Big Picture photo blog from the Boston Globe is always worthy of a visit, especially at Year end...

Year in Pictures: Part I
Year in Pictures: Part II

New Blog (will travel)

noreply@blogger.com (Michael Davey) — Mon, 12 Dec 2011 02:04:00 +0000

I'm moving to a less Blogger format for stock market content. I'll leave the CD site here up for archives and for posting occasional off-topic color. Stay subscribed if that interests you.

A dedicated address will be had shortly. In the meantime, the new site resides here.

Thank you for flying Centrifugal Deforest

Energy Sector is Pulsing (slide-show of the leading charts)

noreply@blogger.com (Michael Davey) — Sun, 04 Dec 2011 18:34:00 +0000

Good, Bad and the Ugly (allocation review)

noreply@blogger.com (Michael Davey) — Sat, 03 Dec 2011 17:49:00 +0000

This weekend's screencast is in three parts. And by miracles of science, technology, and a timely nudge from someone knowing better, they're now embedded.

...like my teeth!

Part-1 - The Bad (Heavy action overall + RR-Tracks patterns on LQDT and SWI):

Part-2 - The Ugly (ugly is you thinking this is another 2008):

Part-3 - The Good (some leadership stocks and industry groups: ULTI, CXO, SE, KOG, GPOR, HD, FAST, GWW, TSCO, Copper and Crude Oil, are all discussed)...

In case you were short

noreply@blogger.com (Michael Davey) — Thu, 01 Dec 2011 01:39:00 +0000

If you were caught short this week. Here's a simple rule which may be of help in the future:
In case you were short

And Previously (since my last lazy post)...
Stuck Stuck Stuck (but not like a pig):
Part-1
Part-2

Fio Fusion (Update on the Secondary; priced at $33)

noreply@blogger.com (Michael Davey) — Tue, 22 Nov 2011 02:51:00 +0000

Updated Screencast:
How I'm trading the FIO secondary
FIO was priced well in the hole tonight, at $33.00.

Composite of Recent Screencasts

noreply@blogger.com (Michael Davey) — Mon, 21 Nov 2011 03:24:00 +0000

In Case of Waterfall (identifying group money flows and preparing long-side entries): Part-1: Strong money flow into the Oil&Gas Transport/Pipeline industry group
Part-2: WFM may slice here and present an entry
Part-3: TSCO, HD, GWW, FAST
Part-4: Property/Casualty/Title Insurance - Insurance is exciting!
Part-5: Biotechnology-1 - has been consolidating; mixed picture lately
Part-6: Biotechnology-2 - Includes how NOT to play Biotechs
Part-7: INTU is nothing but net. Also FICO, HMSY, HSTM

Bear Buzz Kill (no super-hero stuff, but the bear-trap is set imo):
Bear Buzz Kill (Macro this time)...Part-1
Bear Buzz Kill (Macro this time)...a calm conclusion

Fusion-IO (and the ucoming FIO secondary)

noreply@blogger.com (Michael Davey) — Wed, 16 Nov 2011 03:28:00 +0000

Nuances of an upcoming secondary offer for a successful IPO
Screencast in two parts:

Part I - A fundamental look at FIO and preparing for the secondary
Part II - How the secondary helps to define a winning or losing position

Red Flag Charging (index of recent screencasts)

noreply@blogger.com (Michael Davey) — Sat, 05 Nov 2011 16:40:00 +0000

The red flag is out. Don't do what I do, but energy is pulsing out there.

I'm attacking still.

Recent video screencasts:
-Nov 4: Would you buy a used car from this chart?
-Nov 4: LPSN: Another pulsing charger from Friday's tape
-Oct 29: Chargers are pulsing and the Russell 2000 is poised
-Oct 24: GNC: Clockwork study in how to play an IPO

Follow @Centrifugal to see me munched

AMZN (Small thoughts on the big picture)

noreply@blogger.com (Michael Davey) — Thu, 27 Oct 2011 02:54:00 +0000

There is a developing business trend beginning to gain traction. It entails acting more like entrepreneurs and focusing on the long term - at the expense of Wall Street!

As investors, we have the edge. We can sit idle while entrepreneurs work to prove their concepts.

Click for Screencast: Small Thoughts on the Big Picture

Follow @Centrifugal to fade trades in real time

Gameplan for AMZN Earnings (after the close today)

noreply@blogger.com (Michael Davey) — Tue, 25 Oct 2011 18:30:00 +0000

Amazon.com reports earnings after the close tonight. I reduced the core position size yesterday (for the second time). I'm looking to re-increase positions on the heels (hells) of EPS, depending.

Click for Screencast: Gameplan for handling AMZN earnings after hours.

[Update: sold AMZN the morning after earnings, 201.84 average]

Follow @Centrifugal to fade trades in real time

Hunt for Emerging Leadership (screencasts from last week)

noreply@blogger.com (Michael Davey) — Mon, 24 Oct 2011 04:45:00 +0000

I scanned more stocks than my eyes can bear this weekend, and smaller growth stocks are emerging from cracks. In droves.

Maybe I've been too negative lately.

New Leadership Hunt - Newest Screencasts Oct 21 & 23:
-Part-2: Turns out, leadership is emerging in a big way
-Part-1: Keep an open mind on where leadership is emerging

Screencasts from Oct. 19th:
Europe News Becoming like Anthrax in 2001
Hunting for strength in the midst of a major sell program

Screencasts from Oct. 17th:
Part-3 of the Psychological Tape. Explaining my now long-only stance.
Part-2 of the Psychological Tape.
Part-1 of the Psychological Tape...Unedited

Follow @Centrifugal to fade trades in real time

Upside Flash Crash (not out of the question)

noreply@blogger.com (Michael Davey) — Fri, 14 Oct 2011 21:46:00 +0000

Be afraid, be very afraid.

Bears that is.

Eventually, we should all be afraid. We're all going to be snuffed by this stuff at some point. But I'd be shitting rectangles this weekend if I were heavily short and happened to see the after-hours tape tonight.

After the futures closed, the Nasdaq QQQ's flash-crashed 2% higher in a couple seconds. Other derivative ETFs followed suit (namely QLD, QID).

My dog has known for some time we're going to get an upside flash-crash; at least at some point. I share everything with my dog - bouncing ideas of his titled little ears and see how they float. This one floats very well. Quite a few players in this business are caught under-invested and/or short right now. Machines know how to chew-up a situation like this in a hurry. Up the pipes or down the hatch, I don't see how direction has to be in a single direction. This is a dynamic.

If you're heavily short this weekend, you might go out for a nice meal, or two. Catch a movie maybe.

Here's one - Human Pets and the Machines who Adore Them

...rated PG-13

Follow @Centrifugal to fade trades in real time

Cheerio

Screening for Retail IPOs (VRA)

noreply@blogger.com (Michael Davey) — Thu, 13 Oct 2011 04:49:00 +0000

Using Marketsmith to hunt for emerging leadership in IPOs. Let's move onto the other hot-money industry group in this advance - (cheap and hideous) CH-Retail.

Click here for screencast

Screening for Biotech IPOs (ECYT)

noreply@blogger.com (Michael Davey) — Wed, 12 Oct 2011 16:30:00 +0000

Using Marketsmith to hunt for emerging leadership in IPOs (While best to avoid in a bear market, IPOs are a great source of performance protein if in a new bull run).

Click here for screencast

Updated Lists and Screens (using Marketmith)

noreply@blogger.com (Michael Davey) — Wed, 12 Oct 2011 05:37:00 +0000

Tonight's Screencasts in two parts:
Part-1: Updated Front Pocket Longs (hand picked)
Part-2: Updated Long and Short Lists (screened)

I'm Very Short Cancer Right Now

noreply@blogger.com (Michael Davey) — Wed, 05 Oct 2011 22:56:00 +0000

I need a nap just now, but I want to get this out while my manic phase is holding.

In the past 24 hours (perhaps and apparently) we've seen the end of the recession and the cure for cancer. You just don't feel so good about it yet.

Marches against Wall St. are only growing right now, as not nearly enough raider's dicks have been pinned to wrecking balls in these declines. I suppose that illustrates this post as a little cynical.

I won't disagree.

But I only know what I know (which is zero), and I build my gameplan from there. Here is what I know:

-Market professionals are under-performing their broad market benchmarks this year and the broad market is down YTD (an awesome combination for Q4 results)

-Of the largest positions market professionals hold, one of the largest is cash (while many pros are net-short)

-The market has exploded upward from an Early October low. It may back and fill. It may or may not re-test significantly lower levels

-Market professionals will chase performance to save their finite careers, especially near year end

-Biotechnology is an emerging/re-emerging leadership group

-As long as the market is rising, I'm buy leadership heading into the end of the year

This doesn't mean the market will go straight up, but, if it is worth owning it will go up more than under-invested professionals are comfortable with. To the degree they remain uncomfortable, I will keep pushing long. If they pine for a pullback though (for a more comfortable entry point) AND get more than a whisk-chance to get aboard, then I will hand them my shares [see Inverse Genius post from March 27th, 2009; for reference].

I don't mind a higher-low retest, but I prefer it to be over about as fast as these guys can acknowledge it is upon us. Scary news driving the decline is the best recipe for this scenario. The market refusing to pullback much at all though, or at least not until from higher (more uncomfortable levels), is preferred.

And I don't care, seriously. My march against Wall Street came at a very young age. I'm fighting as best I can, while I still can and I'm doing it with wooden teeth. I try to measure power and I try to measure foolery. When the two meet there is something special to glean.

Money is pretty powerful.

The leadership is broad on this rally and that is a positive. Of the highest-fliers right now, the most exciting on the tape are companies developing and/or selling treatments for cancer. I'm posting the list below and linking the Supplemental Screencast here.

I am long three of these just now and I expect to trade more from the list. While I may sell at any time (Follow @Centrifugal to fade trades in real time), at the moment...

I am very short cancer.

This is not a recommendation. Fading me is fine, but do not buy any of this list because of me.

BIIB
CELG
ALXN
SGEN
AMGN
MDCO (coronary interventions)
ARIA
BMRN (genetic diseases)
REGN
PCYC
VRTX
ONXX

Fair well

Intermediate Term Low is In (gameplan to yr-end)

noreply@blogger.com (Michael Davey) — Tue, 04 Oct 2011 23:44:00 +0000

Two Part Screencast...
Part-1: Intermediate-term low is in
Part-11: AMZN is the new $AAPL, into year end

Fakedown Set-ups for Monday (ATHN)

noreply@blogger.com (Michael Davey) — Mon, 03 Oct 2011 01:47:00 +0000

Several healthy stocks look poised to break key moving averages. Will they break-down or fake-down?

ATHN looks best to fake-out - click here for screencast

Discipline (a sit down lecture)

noreply@blogger.com (Michael Davey) — Sat, 01 Oct 2011 23:37:00 +0000

After accounts were gently whacked late in the week, I got to thinking (typically a dangerous endeavor in my line of work).

I realized I should be warning readers more on the difficulty of trading a bear market. And specifically, that if you're relying on me to make money, I can guarantee you losing in the long run (clients not included!).

Certainly, we're capable of having similar ideas and disciplines and it is only natural that we'll be on the same trades and playing the same direction from time to time (albeit, uncomfortable for me). But I'm a trained maniac and there is no way to follow along with that, seriously. Every investor has to develop his own disciplined strategy, which is suitable for his specific skill-set, personality and purse strings. You will suffer otherwise and I would take the other side of your trades blindly, if I knew you were matching me trade for trade. I'd short myself!

I'm presenting my strategy, my principles and my individual trades (every trade since February, 2009) for specific reasons. There are some negatives to being this transparent, but it works for larger reasons. First, it's a way to communicate with clients (who tend to care about this stuff; fill-prices vs. others, whys and wherefores, etc.). But more important, I wanted a public record of my late-career machinations (blow by every blow) and I knew it would make me only more disciplined in adhering to my rules and principles - knowing that if I was to contradict those principles (holding a broken stock, for example, in hopes of exiting at a higher price), then I would have to hold that position publicly for all to see. It's much easier to bend the rules when no one is there to scrutinize. We tend to behave better in public, right? We straiten-up when presenting to an audience. We fart less when pretending our shit smells brighter, no?

This game requires behaving better.

Lately (you may have noticed), we're in a difficult market. So until the larger trend has changed for the better, if you see me attacking long (even if I'm good at picking good spots and decent stocks), I'll be fighting the larger trend and likely to lose money (especially if I am you!).

Decent people should never fight the larger trend, especially in a bear market. Leave the Jim Rose antics for the freaks. Don't swallow swords or hang cinder blocks from your nads because you see someone who can do it. You'll exhaust yourself when successful (thus, you'll still miss the easier trend when stocks finally do go higher) and you're only one hiccup from a bloody throat.

While I largely missed the month of August due to travel, I can assure you I would have leaned short into that death-bed of weakness (shorting is a hands-on endeavor, whereas a trending bull market is easier to manage when away from the desk). Sentiment was still fairly positive in August, while action resembled the plague. Today though, we have a slightly better tape, coincident to a plague in sentiment. Charts of indices suggest further weakness (this week clarified any doubts), but there remains a larger handful of individual charts I would buy today, than the number I saw in August (while inhaling volcanic dust in Iceland). Any name which can manage now a higher-low from September, and subsequently marked a higher September low compared to August AND has the support of it's larger industry group (meaning the group itself is of the highest rated, in terms of relative strength), is a candidate for future success.

If only the bear market would end.

I like this set-up at this time of year, largely because I've been rewarded so many times for attacking similar. In recent years, however (due to old age!), when volatility is high, I don't like getting ahead of the market (apparently I was feeling 60 again, getting ahead of the larger trend this last week). In the modern era (post 9-11) the reason I've cleaned-up every year since 2003 (and this one so far) is because, as volatility increased, I moved to a one-step behind approach and followed the market (while every genius in the biz remains bent on predicting where markets are headed, or beheaded!). I got off track with that discipline this week, even if for a good reason (as these stalwarts have all learned now and are fundamentally negative, coincident to signs of life under the market's surface).

Clever thinking is what cost me then, as I let go protective hedges ahead of the broad market improving and subsequently took lumps for it. This behavior endangered my better mood and importantly, the gumption necessary to continue out-performing. Hence, it's a little reckless.

The market is the mob - show some respect or else get whacked. Pretty simple really.

In 2002, before a new bull market had begun (check out April, 2003), volatility was low and trading was becoming very difficult. If you jumped onto a trend, that was when it would revert (up or down, it was only consistent in that it was going nowhere). This was the death of me and I knew my human trading days were numbered (fortunately for me, poker was very popular in 2002...suckers!).

Well, my days are numbered still and I'm no longer feeling 60 again. Volatility remains quite high, which I appreciate, as a mere human can still find opportunity. But I can't be so frisky (even if I see a better market than long-only heads appearing on CNBC, who, by nature, are supposed to see a brighter future for stocks than me. It's always exciting, when our roles are reversed).

Thus, I'm pretty sure October is going to be a smash-mouth gaining month for stocks, but I don't care. I'm 100 years old now and having a good year. I got away with a good quarter (just ended), but it took a lot of depleting energy and equity accounts were only so-so sick by Friday's close (still amply sick, compared to most and certainly the broader market, but nothing especially bloodthirsty). Futures accounts, however, those were pure evil, as I picked-off 13 out of 14 trades profitably during one run and avoided most of the bigger sets).

Smash-mouth or not then, I'm going to peel back some and wait for the market to take the lead. I'm going back to the 1-step behind approach that has printed performance for the last 9 years (pre-2000, FYI, I was always front-running the market, and could be counted on for +200% years - when I wasn't busy blowing-up instead).

This means I'll be lightening-up, everywhere necessary and largely laying LO - before driving leadership stocks higher into the Thanksgiving holiday!

The longs left in my position (below), while in need of a hedge perhaps, were not yet necessary to sell.

Cliff notes:

Don't Do What I Do
or else, I'll bite your legs off!
Develop and manage your own discipline, based on your style. Then stick to that personal discipline.

Bah!

Follow @Centrifugal to fade trades in real time

Current Position: Equity accounts long-only, 46% invested

Currently Long (according to size): LO (20.1%); ROST (7.1%), [Edit: left out 7% APKT position; 1-3 day trade only], CELG (6.9%), LQDT (4.9%)

Currently Short: no current position

Futures: no current position

Streaming TICK (tutorial, part-2)

noreply@blogger.com (Michael Davey) — Fri, 30 Sep 2011 21:54:00 +0000

Chart.ly screencast: Streaming TICK tutorial. This is Part 2.

Streaming TICK (tutorial, part-1)

noreply@blogger.com (Michael Davey) — Thu, 29 Sep 2011 17:52:00 +0000

Chart.ly screencast: Streaming TICK tutorial. This is Part 1.

RR Tracks on AAPL Chart (screencast)

noreply@blogger.com (Michael Davey) — Mon, 26 Sep 2011 04:15:00 +0000

The dreaded Railroad track pattern is overhead now on The Apple Computer.

Click here for my screencast on attacking AAPL short (short-term trade only).

Trader's Ed (Red Asphalt edition)

noreply@blogger.com (Michael Davey) — Sun, 25 Sep 2011 22:16:00 +0000

Let's admit, some of what we saw last week was ugly.

Unwholesome actually.

Significant cracks re-emerged in the markets and I’ve backed-off, for the moment at least, my game plan of re-loading leadership longs into the resumption of your damaged mood.

As I’m prone to becoming cheeky when inspired, at times, I have to be disciplined and adjust the playbook when action in the market surprises me. This is especially true when forces larger than me aim for my head with ribboned toothpicks.

Animal spirits are fundamentally dampened now (which is important). Yes, yes, there were excited hopes of a bounce born Friday, but that’s a standard psychological response from men of business media who had their nuts up in a noose the day before. They’re just happy breathing, if you know what I mean.

This wasn’t the higher-low downdraft my salivary ducts were counting on (not yet anyway). For that strategy to maintain a positive expectation value, your mood should be ugly, certainly true. But coincident to lower sentiment, there should be clear indications of improving strength in the markets at the same time (a market making higher-highs and higher-lows from a previous month’s shockwaves, coincident to lower-lows in the prevailing mood, for example. We had something like that building before last week).

Negative sentiment, in and of itself, is not a bullish signpost. The worst elevator drops in history appeared coincident to negative sentiment and oversold conditions (re-read that line if you think an oversold market is a positive set-up). You need to see real strength (not merely value), coincident to the brood storm. Otherwise, you need to wait for a better market.

Then there's this anecdotal religiousware I use to preserve my neck from time to time: Severe damage can only persist for so long before everything becomes vulnerable. The path of wrath (if you will), when sufficiently inspired, sinks all ships (even if some more than others).

So, while I remain an idiot still and I can’t help but keep excited over the opportunity to get long leadership stocks, this nutcracker of a week was more than my balls were bulging for. I did get short ahead of the carnage (incroyable!), but the best strategy would have been simply to cover shorts during the panic, and go buy a couple of nice sweaters. I added several leadership longs during Thursday’s tumult instead, and three out of four of these silk-knits traded up from that point Thursday (which is a feat), but failed to exhibit any power then when the pressure came off on Friday (which is frightening). Friday should have been the gravy day for leadership, but the gravy was cold. Not a good sign.

If you’re trading aggressive leadership and your portfolio is acting aces on a flat market day, the next day the general market wakes up as well (hot money is the first to move). On days when your portfolio is going nowhere, however, while uglier merchandise is bid-up, the next session or two typically marks the beginning of a downdraft. When you buy leadership, you are ahead of the curve – for better or for worse.

And that is the point taken from Friday’s sermon. Leadership, which had sustained pressure so well (again!) on Thursday’s mega-drub, did not behave like the proverbial bar of soap under water once the pressure came off (the IBD-50 actually dropped .5% Friday and losers there had significantly higher relative-volume than did winners; the sort of action which terrifies me when I’m long of the same sack).

These lovelies should have popped right back to levels ordinary people are again uncomfortable to buy. They did not.

To be sure, I’m a bit of crackpot (crackpot scientist, actually). What you may not have realized though, is that, having failed to excel in the really advanced physics and math courses, I’m also something of a logician. Here is how I see the present situation:

1). When leadership fails to advance once external pressures come off, or if it is under-performing in that advance, it is likely to move lower instead.

2). When leadership is the only building left on the block that hasn’t been sufficiently hit and severe hits keep coming - leadership is going to get hit.

There’s no rocket science to this analysis. As a matter of fact, rocket scientists are too smart for such pedestrian logic (those guys have been short since 1999!).

In a true bear market, everything gets hit eventually. The group of stocks which held-up so well during the first few shockwaves, should get salted now if subsequent waves continue to appear; even if but for a session or two.

And hey, maybe not. Maybe we rally from here and for more than just a bounce. I don’t really mind. I can catch the next train (especially if it has left the station and you’re uncomfortable to pay-up and get aboard). It’s easy to pick fruit when it’s staring you in the face and your peers are primarily running for cover. But if fruit is no longer present, well then maybe there’s something to all the fuss. Hunting for squashed dimes near tracks of trains carries a negative expectation of value.

I need quarters to behave like that.

And it’s more than this subtle characteristic of Friday’s tape that has me fearing the quality of fruit. The smartest economist, we all know, is the price of Copper, and carnage was bathed in technicolor in in that market last week. Prices managed lower-lows on Monday (nothing sensational), but then accelerated into oblivion from that point forward (Copper fell 15.7% on the week, 18% counted to the low). Energy and softs were cemented and tossed from bridges as well, while Treasuries held firm and the Dollar strengthened. These are deflationary signals - signals that are screaming in concert now (hopefully for this weekend only).

Deflation is pretty much the market's worst fear.

I didn’t mention Silver. Put the children to bed and consider that Silver dropped 22% in two days (25% counting to Friday’s low). Train wreck is too kind a word right now for silver. Commodity futures trade 10x leverage, so that’s roughly a 220% loss in two days, in laymen terms. Those are Red Asphalt returns in Silver last week.

By the way, If you can’t watch that clip without getting sickened, you should not trade commodities (you probably shouldn’t anyway, but that’s another story). There are people with similar stubs for heads this weekend, having the misfortune of a bad trading week in commodities. As that movie once said (back in Trader's Ed and long before you were born, I think), “whether he failed to see the stop signs, or simply chose to ignore them, no one will ever know - but this account is dead.”

Very good, I was wrong to suggest another wave of suffering was all I needed to re-load leadership and drive these stocks up into Thanksgiving. I’m sidestepping that plan for now and keen on letting leadership have its day in court (she’s a witch!)…Before considering my same strategy of driving these names higher into Thanksgiving (!).

If (as in, IF) there will be another shockwave this upcoming week, I’ll lay money the NDX, which held up so well up to now, is going to get clown-dunked; even if for one or two sessions. We’ve seen a desperate grab for liquidity lately, over a wide and certain swath. On Friday the NDX’s number just came up.

Step up to the counter cowboy, Swedish meatballs are to die for.

[I’ll be posting a screencast regarding the subtle flaws of Friday’s leadership tape. A pseudo science explanation on why I am now, temporarily for the time being, short the NDX, and in particular, the Apple Computer.]

Follow @Centrifugal to fade trades in real time

Current Position: Equity accounts are 2.1-1 net-short, 108% invested

Currently Long (according to size): LO (9.9%); ATHN (8.7%), ULTA (7.9%), CELG (7.3%),ROST (7.2%)

Currently Short: Nasdaq-100 index via QID-long (19.4%), NSC (14.5%), AAPL (12%), BAC(6.1%), CSX (6%), BIDU (5%), SINA (4.1%)
...due to relative beta vs. current longs, QID is weighted at 1.75 x's (not 2x's) in the net-short calculation.

Futures: Short Dec SP500 mini from 1134.25, 5% of accounts