The Kirk Report

Back To The Overbought Routine

Charles E. Kirk — Wed, 11 Nov 2009 14:41:43 PST

We gapped higher, pressed to new recovery highs, became overbought and then pulled back as the dollar recovered. That's pretty much it in a nutshell.

There is an old saying that it doesn't matter where you go but where you finish that matters most. For the bulls, today's new recovery high in the S&P 1098 (1 point higher than October 19th high) will certainly grab some attention if for no other reason that we get closer to the next target which is the 1121 fibo level everyone has been talking about for months now. For some that also means the another threatening head and shoulders pattern has been invalidated with today's breakout.

Read more of my after-hours report.

Veteran's Day

Charles E. Kirk — Wed, 11 Nov 2009 06:13:58 PST

When visiting my mother in Ohio a few weeks ago, she brought out some old photos that I hadn't seen for many years including the following one of my father shown in a newspaper clipping back in January of 1968:

My father was drafted to the army for the Vietnam War and served honorably on the front lines, something I've always been proud of.

While Dad is no longer with us (he passed away back in 1999 due to Diabetes contracted from the use of Agent Orange), our family understands and truly appreciates the service so many men and women have provided and continue to serve for our country. A sincere word of thanks goes to all of who you have today. This is your day and you deserve it!

China & The U.S. Dollar

Charles E. Kirk — Wed, 11 Nov 2009 05:38:59 PST

Good morning. Amid gains in overseas markets, a new low in the U.S. dollar, and strength in China's exports, premarket futures are positive.

Top headlines include news that Geithner affirms a strong dollar policy, Fed officials are more worried about recovery prospects than inflation risks, Goldman Sachs is forecasting that gold prices could reach $1200 by year end, UPS sees growth and higher rates, 45% of Americans now rate their personal finances positively, credit card issuer Advanta files for bankruptcy, U.S. mortgage modification plan picks up speed, banks hasten to adopt new loan rules, hedge fund managers at Bear Stearns were found not guilty of fraud and AIG's CEO has threatened to leave after three months on the job.

Read more of my premarket report.

Just Business As Usual

Charles E. Kirk — Tue, 10 Nov 2009 15:16:25 PST

While the momentum ran out of steam, the overall market held up ok considering the gains we've seen of late. Weakness in the dollar once again helped keep the bears at bay.

That said, it was a quiet trading day and not one I'd read much into or attempt to draw significant conclusions from even though I'm sure that won't stop others from giving it a shot. Looking over my news and blog feeds this evening, it seems like there are three camps out there: bulls who think this is just a pause that will refresh, bears who think we're stalling out, and those who are uncertain of either and frustrated as a result. The latter is probably the most popular group from what I see and hear and its completely understandable why this may be. The market is not providing a lot of easy setups at the moment and that alone will tend to irritate the troops.

Read more of my after-hours report.

Another Day Of Gains?

Charles E. Kirk — Tue, 10 Nov 2009 05:58:10 PST

Good morning. Futures are slightly negative as the dollar attempts to stabilize and investors question whether the rally can continue especially since the S&P has posted a gain every single trading day so far this month.

As expected, news flow is relatively quiet but there are a few noteworthy items to cover including a decrease in retail store sales, Moodys makes some positive comments about AIG, heavy losses at MBIA due to its insured credit derivatives, as the market rallies good times return for hedge funds, Senator Dodd is set to unveil a financial reform bill and Obama promises to question China over the Yuan.

Read more of my premarket report.

Short Squeeze

Charles E. Kirk — Mon, 09 Nov 2009 15:53:31 PST

This morning we gapped higher and off we went:

To say the least, I've been around long enough to recognize a short-squeeze when I see one.

Last week we saw two potential tells that this could be in store - 1) a dramatic change in the sentiment as expressed in the AAII (i.e. bearish sentiment had risen to levels not seen since before the March lows) and 2) the positive response to the jobs report and, in particular, late-day strength on Friday indicating that bears had become trapped and not able to escape their positions. When we jumped from the opening bell and continued moving higher, it was clear a short squeeze was underway and another beating was in store for the bears.

Read more of my after-hours report.

What Winners Do To Win

Charles E. Kirk — Mon, 09 Nov 2009 13:21:58 PST

One of the things I continue to notice not only within my own trading circle of friends who trade for a living but also within my mentorship group is that the traders who outperform everyone else have an above average tendency for very strong comebacks. In other words, after they have a bad trade, the next trade is good. After they have a bad day, the next day they have a great day. After they have a bad week, the next week they have an even better week. And so on. Time and time again.

Based on my research, some have said that the reason for "comeback" tendency in high-performers has to do with the fact that after they make mistakes, they become even more focused and motivated than ever. And, that in turn produces better results. Sounds logical, doesn't it? But, I don't think that is completely true! In some traders I've seen them make a mistake and then follow that up with an even bigger mistake. A losing day, followed up with another losing day. A losing week, following up by another losing week. Sound familiar to you?

To understand what the difference may be, my research has indicated that winners tend to comeback not because they are more motivated or focused, but because 1) the level of their skills they posses simply is higher than the rest, and 2) their confidence in themselves and attitude remains positive even during the occasional setbacks that they experience. In fact, winners are more willing to "laugh it off" or find humor when they make stupid mistakes than take themselves and what they do too seriously or beat themselves up. They figure out the best way to correct a mistake is not to dwell on it but follow it right up with a great trade. What is done, is done, and they quickly move on.

I was reminded of this phenomenon over the weekend when watching the HSBC Golf Championship in China. Frankly, I've never seen a worst batch of shots by the world's best players than in the final round in this tournament. But, the winner, Phil Mickelson, displayed something I see in traders who outperform. After completely whiffing a chip shot, he smiled, laughed it off, and then followed that up with a good chip and then a long-putt to make his par.

Phil is known for his short game and he whiffed it in front of millions with everything on the line. He even sells a popular DVD (which helped me to move my handicap back down to single digits this year) on how to carry off that very same shot. Most golfers would have been so mad at the sheer embarrassment of it all, they couldn't make a par that hole if their life depended upon it. Instead, Phil smiled, understood mistakes do happen, and then went immediately back to work and made a number of good shots that enabled him to win the tournament.

The best traders do the exact same thing. They know and expect mistakes will happen but realize that if they're going to win, they need to follow up every mistake with a great trade. However, you can't do that if your mind and emotions are in the wrong place which is why not only have the right skills is important, but your attitude and confidence in yourself and in your strategy will play a more significant role in your ultimate success than you may currently understand and believe. And, that only comes through tireless practice and devotion to your game.

As The Dollar Drops

Charles E. Kirk — Mon, 09 Nov 2009 05:57:11 PST

Good morning. We start the new trading week with positive futures after a big rally in overseas markets, strength in commodities and new highs in gold as the dollar drops again. There's no major economic data for the market to worry about today.

Top headlines include agreement among the G20 to keep the stimulus going, five more U.S banks fail, Geithner shoots down talk of a new transactions tax, China hopes U.S. keep its deficit to appropriate size, House passes historic healthcare bill, famed short-seller James Chanos recommends dumping munis, the insider trading probe expands to include Steven A. Cohen's SAC Capital Advisors, the head of Goldman Sachs said banks do God's work, and Hurricane Ida threatens Gulf of Mexico's oil output. Finally, we also have some M&A activity at Northrop Grumman, Kraft and T. Rowe Price.

Read more of my premarket report.

The Comeback Kid

Charles E. Kirk — Fri, 06 Nov 2009 14:52:23 PST

What a difference a week makes:

As you know, a week ago things were looking quite grim, but as we've seen several times this year, this market has a knack for playing the comeback kid.

For the week, the S&P 500 rallied back +3.20%, Dow +3.20%, Nasdaq +3.29%, and the Russell 2000 +3.12%. To make the big money this week being long emerging markets (EDC), gold miners (GDX), silver (AGQ) and basic materials (UYM) were good. Relative strength was also seen in Brazil (EWZ) and India (EPI).

Live Chat With Brian Shannon

Charles E. Kirk — Fri, 06 Nov 2009 06:30:20 PST

Brian Shannon from AlphaTrends will be here at 11:AM EST to take our questions. To attend, please visit the following link:

Live Chat With Brian Shannon

Brian has become quite popular and for very good reason - many traders have found his technical approach and educational materials quite useful. In fact, Brian is currently ranked as the most influential trader on twitter.

We hope you'll join us today for an hour of timely conversation about trading and the market.

10.2% Unemployment, 190K Jobs Lost

Charles E. Kirk — Fri, 06 Nov 2009 05:52:34 PST

Good morning. Futures are under pressure following a worse-than-expected jobs report.

Other headlines beyond jobs include news that the OECD sees strong signals of worldwide recovery especially in China, the G20 to stay the course on economic stimulus, the latest from the oversight panel on TARP, the Feds widened their crackdown on insider trading, Fannie wants another $15 billion from the Treasury, earnings from AIG among a few others, slower money flows into commodities and lots of media hype over the new Driod phone.

Read more of my premarket report.

Back To Square One

Charles E. Kirk — Thu, 05 Nov 2009 15:26:58 PST

At this time last week, the S&P 500 was at 1066. Today it closed at the same level:

Today's rally was more impressive in my view primarily because if leadership by Russell and Nasdaq - an indication not only that the gains would be sustained throughout the day (which they were) but also as a sign that the risk trade is back on. I also liked the fact that 90% of the stock screen machine stocks posted a gain on the day. Remember, I monitor that closely for confirmation of what we see in the major indexes and that's a good sign. Finally, both the Nasdaq Composite & S&P 500 also reclaimed their 50 day moving averages. The only one below that right now is the Russell 2000 which coincidentally was the strongest performer today.

Unfortunately, today's uptick also removed the oversold condition we've been working with since October 28th. This is not unexpected as you know, but clearly offers an interesting setup into the jobs data.

Read more of my after-hours report.

Member Mailbag

Charles E. Kirk — Thu, 05 Nov 2009 11:37:47 PST

Time for another member mailbag. Here's what I'll be covering today:

The Importance Of Sector Performance
Quantifying Low/Risk High/Reward Trades
Handling Conflicts Between Weekly & Daily Time Frames
Using Real-Time Scans
TIP As A Cash Position
Reading Fast
Evaluating The Good Guys & The Bad Guys

To read, please login.

A Surge In Bearish Sentiment

Charles E. Kirk — Thu, 05 Nov 2009 06:15:39 PST

Good morning. Futures are in positive territory following a batch of better than expected data and earnings news. Markets overseas were mixed after both the Bank Of England & Europe Central Bank followed Ben Bernanke and left their rates alone.

Regarding the economy this morning, investors are combing through the latest October retail sales numbers, a jump in nonfarm productivity, a rise in consumer bankruptcies, lower than expected jobless claims and a one point rise in the Monster Employment Index.

In other news, Congress has approved more jobless & housing aid while looking for tax cuts for big business, Senator Dodd's proposals for regulatory reform draw fire, Cisco System's CEO remains upbeat like usual, a buyback at Research In Motion and the Yankees win the world series.

Read more of my premarket report.

Gap & Crap

Charles E. Kirk — Wed, 04 Nov 2009 15:08:03 PST

It was another interesting Fed Day. Notice both the 10-day & 2-day views below:

We gapped up, hit some stretched levels this morning (like the equity-only put/call) and then crapped out in the final few minutes to fill this morning's gap. Once again relative weakness by the Russell 2000 & Nasdaq provided a warning throughout this morning's session that the pre-Fed gains were not on firm ground.

Read more of my after-hours report.