WED. JUL. 9 THOUGHTS

One of the most common trading concepts which is foreign to many new much less experienced day traders alike is this principle: if one is steadfast that a certain entry point will work and the trade not only does not set up but the opposite definitely occurs, a phenomenal trade can be had by doing the opposite of the original thinking! For instance, Goldman Sachs (GS) was strong in the early going yesterday but came in, trading right around unchanged for a good 20 minutes. In the interim, the market began to rally. Several people (including the author of this piece) felt GS was a good buy. However, the longer that the market moved and GS simply sat there, the higher the likelihood that GS became a short. Indeed when the market began to sell off a bit, GS was one of the leaders to the downside in falling more than two points in 15 minutes. The point here is that one always has to be nimble when trading, but especially so in day trading. Furthermore, just because all the research in the world tells you that you should be doing something, if the actual circumstances dictate otherwise, forget that homework and turn an empirical mistake into a very real profit.

Overnight, markets in Asia and Europe rebounded on the heels of Wall Street’s gains yesterday. Oil also bounced amidst reports that Iran tested some long range missiles. This morning, the market has shook off some early weakness on the Iran news with futures in positive ground as banks and oils have led the way. The tech sector is relatively weak after CEO John Chambers discussed long-range plans at Cisco. Look for selected short covering unless some sort of news pervades The Street, but also look for selected weakness in techs which bounced yesterday as an opportunity to short.

GDP- major share offering at 64. The stock traded down there in the very early going, but has bounced. Looking to buy it thru unch. Conversely, it is a short thru 64.

AA- good earnings. Likely will follow market. Looking for A-B-A2 of some sort depending on market direction off of the open

NWA- closed very strong yesterday. If it opens down with a decent market, looking to buy near unch.

MHK- warned last night after closing strong. It is an A-B-A2 depending on the direction of the market.

FNM,FRE- very strong yesterday. If they open higher and approach unch with a weakening market, looking to short thru unch.

RIMM,AAPL, GOOG, other big cap tech- tech stocks relatively weak this morning. If these open near unch and fail to rally off of the open, likely shorts thru unch.

PDO- has been crushed, down 50% in two weeks. If it opens down, looking to buy thru unch.

Brokers- all up on short covering. If market rallies, A-B-A2 on all of them off of open. For later in day in particular, shorts thru unch.

Not a ton to choose from. Low newsflow and a tug of war after a rally. Very difficult trade today. Good luck today.