understanding the psychology of behavior

Where it lands, no body knows.

Took advantage of the morning strength to purchase April 142 SPY puts to protect against further downside. 

I also purchased some COF, around 76.70.

I think yesterday’s decline was a joke, but it created the begining of our much needed correction. Now traders are thinking on the line of cautiousness, not bullishness which will allow for the correction. (The markets should correct, or trade sideways, throughout March and April.)

FYI… all this volatility and increased level of trading is good for the NYX.  Take advantage of weakness, and buy some NYX… in stages of course. (My next major purchase, most likely call options, will be if the NYX sees 79.)

Well… Congrats Mr. Greenspan, you are the most powerful man in the world yet again.  His comments sparked such a negative tone, along with a ’so-so’ durable goods report, that he effectively wiped out HUNDREDS of BILLIONS of dollars from the GLOBAL markets.  Let me repeat… HUNDREDS of BILLIONS of dollars!

Stocks were not that expensive before, and now they are even better.

Did anyone stop and think what he actually said?  I’ll write more about this later.

Time to dust off the cash on the side lines, and get ready to buy some stocks.

We should all be thanking the Chinese market for the sell off.  The Chinese market was overextended, and was in desprate need of a correction. Thanks to the way the global economy is structured, a domino effect is happening w/in the global markets. (Albeit, I didn’t see any major ‘tell’ within the markets for this correction at this time. The only major abnormality that I saw yesterday was the huge decline in the Transports.  It made me want to short the market, but everything else seemed orderly.  However, I was planning on shorting the market by the end of the week due to the economic date to be released next week… OH WELL)

Do not confuse the market with the underlining economy.  The global economies are still relatively strong, but the Chinese stock market was overextended.

You want to benefit, look at these names…

1. PTR

2. GS

3. NYX

4. GOOG

Strong names getting hit in the pre-market. Why NYX is getting hit is beyond me, as they have little chinese exposure other than the chinese ADRs currently on their exchange.

Observe the charts below…

GOOG - He thinks it will stall. He may be right, but 450 does not appear to break…

Daily:

Weekly:

YHOO - looks bullish, and may see 36, or even 40 if Cramer’s positive statements push it enough. But if it were left on its own, YHOO is overbought and looks like a consolidation is in order…

Daily:

Weekly:

IACI - has already seen a huge run, and it seeing awesome momentum. But looks good…

EBAY - looks consolidated from the summer run, but it is at resistance and I do not think it has enough juice to break it in a correcting/sideways market…

Basically, Cramer is giving his viewers all momentum plays that have already seen nice runs. I guess that is what he means by ‘Mad Money’. But I would still be playing GOOG here, and will probably go overweight w/ call option if 450 is broken, but with the lack of negativity I do not think it will happen.

My price target of 18 has almost been achieved.  Current levels are good enough for me.  The price appreciation is greater than the dividend distribution I am giving up by selling, so I am selling.

The PGH chart looks bullish, but the oil chart seems overextended. I am expecting an oil decline come wed.

Because of the chart set up, tax prospects going forward and dividend, I cannot blame anyone for wanting to hold on.  I will most likely re-enter on the consolidation.

Once Google did not do as expected in the fourth quarter the street hit them. It actually was not hit that hard but non-the-less it was hit.

What did Google mess up on? In a word, nothing. This is a great time to buy a company with a lot of potential still ahead of it.

What a lot of people were not expecting was the effect of Google Check Out. That is what hit revenue, and the bottom line. Some analysts will say taxes were favorable, but that is out of Google’s control, and I do not think it to be the case.

These ‘Check Out’ expenses will not be reoccurring, and current weakness should be used to buy the stock. Here is the potential I am seeing:

1. Video Ads. Revenue shared with users and content providers.

2. Mobile Search Ads.

3. Video Game Ads.

4. A leader in a still fast growing search Ads, and Ad placements.

These may seem obvious, but 2 and 3 will likely be key to Google’s success abroad (especially in China).

A recent New York Times article, originally published on 02/05/07 basically stated, Chinese users are under 30 and play video games and use mobile phones. Now Google is in the position to benefit from these areas of focus.

Google can now target the largest web users in China. With a recent partnership with China Mobile (the largest mobile operator in China), validates #2. And a recent acquisition of a video game ad placement company, GOOG is will be moving into this space too.

Too many positives have developed in the last few weeks to bash the company and its prospects. With 4th quarter earning under Google’s belt, and a depressed stock price, GOOG is interestingly priced, and should be bought.

The sub-prime mortgage market is in an official mess, and will probably take some time to recover. Now the question I have, which leads to my theory, “Does this leave a void amongst institutional investors?”

Mortgages go through a process of securitization. Securitization is the process of selling non-conventional loan packages to investors (public or private) who represent an interest in the cash flow generated by asset-backed loans. Loans are sold to a trustee (for cash), who in turn sells the loan (in bond form) to investors. With respect to mortgages the bond is a MBS, Mortgage Backed Security.

With the collapse of the sub-prime market, and payments not coming in, I’m assuming investors would be weary of such securities, and would prefer higher grade mortgages or something different all together. That “something different” could be the private student loan securitization First Marblehead provides.

The environment maybe ripe for an already fast growing high demand business to get even more indemand and grow faster than expected.

My thesis above tells me FMD has become an even better long-term play, yet wall street is discounting it. The discount FMD appears to be trading at is well deserved. A lot of their earnings are booked, yet they have not received any cash yet. (A better understanding of FMD and their biz/accounting and fundamental arguement is at bankstocks.com, or click the link.)

FMD Technicals:

For a long-term investor, now maybe a good time to enter. I recently took a look at the weekly chart, and FMD is sitting on its 32SMA support.

FYI: I’m not that well versed in the process of securitizations or how they are sold. The above is just my logic.

If you wanted to get into these names in the past, now is a good time to get in.

HPQ:

The fundamentals are still pretty good, and the current support line is also supported by the weekly chart. Looks like now is a good time to get into HPQ if you ever wanted to.

PTR:

Overall negativity still remains with PTR, but the negativity looks to have begun its consolidation. If you are aggressive, now is a good time to get in. If you want to be conservative, wait for a little upward push before entering.

The SLB chart looks good, despite today’s nice move.

SLB should make a move to the red dotted line, and if the wind is on its back (via a sector move) SLB could see the solid blue line.

As far as the sector goes, the wind is on SLB’s back… at least until the downtrend resistence is seen.

Also, the SLB weekly chart looks good, and supports the above thesis.  If oil rallies, so should the oil services. BUT, the SLB is cheap here and on a fundamental level should reach low 70s again.

FYI: I was going to play this before I went to lunch today, but got rushed and did not place the trade. I missed a +1.20 move . I will enter in the AM though, mostlikely the March 07 62.5 Calls.

This is the second opinion piece by John Dvorak that I agree with, and am glad he is part of the mainstream media outlets. (article)

He brings a good argument to the table:

“what is an old 3-minute clip of the “Daily Show” worth on the open market? Seriously, what is its value?   Zilch, that’s what. There is no market. The clip only promotes the show when distributed in this way; it has no intrinsic value.”

I’m glad the mainstream is picking it up, and realizing what is going on, instead of just creating more negativity around Youtube and Google.