TUES. JUN. 3 THOUGHTS

In the face of a more volatile environment, two lessons need to be re-imparted. First, do not be scared of a situation simply because of volatility, the price of the stock, or over thinking. Second, realize the importance of individual trades- namely, one trade can quite literally make or break a day. This is an extraordinarily important theme to be hammered home should yesterday’s mid-afternoon sell-off help to spur further volatility in coming days. To better explain this, let’s discuss one of the items of note mentioned in this space yesterday. Yesterday morning, Goldman Sachs (GS) was upgraded. The stock initially rallied, but with all of the other financials down, GS gradually caught up. This is where the style of trading – “common sense trading”- that we attempt to do comes to play. We need three criteria to fall into place- news, stock action, and market action. In this case, the news was the upgrade- which the stock was not reacting to. Thus, if a stock cannot go up on good news, the likelihood of it eventually falling increases exponentially. Second, the stock had just gotten negative on the day at 9:50AM and failed t orally. Third, the market was gradually weakening. This is the “perfect” intra-day set-up. There was 75 cents to a dollar to be had in this stock in less than a minute once it truly broke down. Again, the good news did not work, the technical pattern was weak, and the market was breaking. That trade literally made the day of some traders. However, most other traders glanced at it yet stayed away out of fear simply because of the price- all the while scalping and losing in other stocks. The two lessons here as we enter into a more volatile spate- do NOT be afraid of trades like this and do NOT underestimate how vital a trade like this day can be to your account balance. Just because a trade seems dangerous, when those three aforementioned factors are in place, it does not get much better and is in fact a safer situation in the electronic day trading game than most trades.

Overnight, markets overseas were quiet...all markets...currencies, commodities, equities...quiet.

LEH- trade of the day if not the week. It may well have gone by the time this is posted. It was beaten down yesterday on rumors of a needed recapitalization. This morning, the "WSJ" had a similar story. The stock should be down. If the market is strong which defies logic re LEH and LEH approaches unchanged, buy every share of it that you can stomach around 33.60-33.70. Risk 10 cents with a potential for a 40-60 cent profit. Conversely, if it happens pre-open, and the market weakens, it is a short thru unchanged. But focus on that first one big-time. if the stock stays negative pre-open, at any point it looks to go positive, buy it.

WHQ/SII- WHQ being bought out for .48 SII shares and 56 in cash. SII is being diluted so it should be down today. If it gets to unchanged, buy SII.

MA/V- MA rallied 15 points on the close yesterday. And it was upgraded this morning. it still should be down this morning...if by some chance MA gets to 320, buy it.

ROYL/ALJ/WNR/PDO/MXC/ROSE- all tiny oil companies way up yesterday. Watch for either short thru unch set-ips if oil weakn or utilize the A-B-A2 pattern in seeking buys.

AUXL- bad drug news. Stock was drilled pre-open down to 26ish. if it gets thru unch, it is a buy because it could not go down on the news.

COR- should trade down; will buy thru unch on momentum.

Earnings- NCS/TOL out pre-open and SAi/BOBE/GES due out after-hours.

Good luck today.