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Fooled me!
Posted by Mark M. - Head Technical Trader on Jul 9th, 2010 6:30pm

I felt quite confident in my assessment of how I thought the trading day would play out and as of 10:45 it looked as though I nailed it even down to the high of the day at 1072, but boy was I faked out. There was just never enough volume to push us down through support at 1066 so the inertia of the week won out and we rallied into the close, leaving me with some losses but overall a very good week for the firm and a slightly up week for me personally.

It does feel as though we have come too far too fast gaining 70+ handles in a shortened trading four day week. As is often the case markets stretch a bit too far and that I believe will give us a good chance to take some gains as a firm and work at making some money to the short side. Good resistance at 1074 all the way up to 1100.

The bull case would be strong if we can make solid gains next week slow grinding through resistance. The bears will take strategic shots at levels if we stretch and see how much the bulls can muster up. It will be an interesting battle.

So I did get it wrong today as I got a bit stubborn but I stuck to my thesis and had a chance to hedge the book nicely if the market did fall apart and the market did remain on an S3 sell signal the entire day. Have a great weekend and let's see what is in store for us next week.

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Tech/Telecom Wrap Up 7.8.2010
Posted by Jeff T. - Freshman Equities Trader on Jul 8th, 2010 11:35pm

The Tech/Telecom book had another positive day today finishing up 47 basis points versus an S&P 500, which finished the day up 0.94 basis points after staging a late day rally and finishing at the highs of the day. Although we were not on the webinar the desk performed well as we took advantage of opportunities when they were given to us and accomplished other projects when there was dead time on the air. I also felt the communication was terrific late in the day as we got long when the Spooz broke up through a trend line. The communication was terrific because there was no ambiguity, at 10:00 Dean said add 100,000 to the top 20 positions over the next 20 minutes and we added 100,000, then he said add another 50,000, so we added another 50,000. At the end of the day with the market on the lows we wanted to get long into the close so we looked for stocks at good levels and got long right in time for the rally. Everything ran very smoothly and we were able to add alpha at days end.

The top five winners in the book were GOOG, DELL, MA, MTSN, and MSFT. GOOG making it into the top five for the second day in a row had a strong day closing up 1.41% at 456.46. GOOG outperformed both the S&P 500 and the NASDAQ by 48 bps and 67 bps respectively. DELL had another strong day closing at 12.78 up 2.59%. DELL rallied into the close with the market and ended the days at the highs. MA was up 1.01% at 209.67 just 33 cents off the highs of 210. Rounding out the top five is MTSN and MSFT. MTSN closed up 1.34% at 3.77 and MSFT was up 49 bps at 24.42 and continues to rally off July 1st $23 low.

The losers were minimal in the book today with TTWO, MU, EMAN, AAPL, and VCLK. TTWO closed the day down -3.69% on what I perceive to be profit taking after an extremely strong day yesterday. The same is true for MU has had a nice run over the last few days from $8 to $9 this morning. MU could not hold at $9 and sold off to close the day at 8.69. EMAN closed the day -3.54% on no news except the fact its EMAN and moves at least 3% everyday. AAPL had a quiet day closing down 22 bps as well as VCLK closing down 46 bps.

As I said earlier we added to the book around 10 this morning and continued to add in the early afternoon increasing the value of the Tech/Telecom book by 80,000. The majority of that was allocated to AAPL where we added almost 50,000 dollars and then spread the other 30,000 out between MA, MSFT, GOOG, VCLK, and DELL.

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So where do we go from here?
Posted by Mark M. - Head Technical Trader on Jul 8th, 2010 7:24pm

Quite a rally today and yesteday, actually all week. I am done trying to figure out the direction of this market more than a day or two in advance as it is truly a waste of brain power. Three weeks ago it looked as though we would rally forever and challenge yearly highs and then bamm the S&P; tanked and we tested 1000 briefly and now we are 65 handles off of those lows.

My best advice is to stay short term oriented until the market figures out direction and be able to trade from both sides.

So to live up to the title of this blog, my thoughts for Friday are as follows:

Friday's are reversal days and we have seen a strong up market this week so it would make sense for the market to sell off tomorrow. I believe that the day will play out as follows, we open down off the bell, rally up to around 1072 and then start a slow bleed down the rest of the day closing around 1050, bottom being 1044.

I am being more specific than usual and not really sure why but let's give it a shot, maybe I will be a hero.

Happy Trading!

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Is the Market Rally Too Soon or Just Late?
Posted by Betty L. - Freshman Equities Trader on Jul 8th, 2010 7:23pm

The market has closed green on the day for the third consecutive day.  In light of the gross sell off we've been witnessing, namely since June 21, I doubt anyone is quick to jump for joy or that anyone has the guts to call this week's action the start of a real rally or recovery.  I've already seen multiple headlines intra day on CNBC suggesting the beginning of a rally after a mere three days of stocks climbing higher.  For me, it is taking me a while for this push higher to soak in because it feels like the move happened out of the blue.  Not that I had expected a major headline to kick off a recovery in the markets, but I would think that there would be a transition period that will take us from hugely disappointing economic indicators to gradual signs of a recovery.  As we stand now, however, we have only recently been pummeled with poor economic numbers--jobless claims, payrolls, consumer confidence, etc.--and more and more bull-to-bear converts.  I don't believe that June's retail sales figures were a justified reason for markets to push higher since these numbers are lagging indicators.  Also, the stronger than expected numbers were largely due to a heavy discounting strategy employed by retailers, implying that consumer spending may actually be trending weaker.  The "saving grace" amidst all of my skepticism is that today's jobless claims number serves as a legitimate sign of economic improvement for me.  The number came in at 454K vs. 465K expected, which is the lowest it has been since early May.

And because I am unable to accept my bearishness, or pessimism, call it what you will, I will honestly say that it is my hope that the market is simply beginning to catch up to the former bulls' sentiment that stocks are cheap, the market is oversold, and there is no real cause for us to be selling off to the degree that we have been witnessing.  Perhaps the market is just late to the party and only now waking up to see that it has been overreacting and was approaching, or already at, ridiculous levels.  The question right now is whether the buying is for real.  Of course I'm not certain, but in the meantime, I will be on the look out for confirmation of directional moves.

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BPOP is Going to POP
Posted by Annie F. - Freshman Equities Trader on Jul 8th, 2010 6:52pm

One of the names the firm has been involved with for a few months now is Popular, Inc (BPOP).  There is a long running joke that this $3 stock is going to be worth $10 by the end of the year. The fundemantal thesis behind this position is the rise in hispanic population in North America. Banks that are more equipped to provide services for the spanish speaking demographic are positioned to grow as they meet the needs of an increasing spanish speaking population in the US. BPOP is a foreign regional bank headquartered in Puerto Rico that provides commercial banking products and services in Puerto Rico, the United States, Venezuela, the Dominican Republic and Costa Rica. BPOP has a market cap of 1.76B, smaller than the industry Mkt cap of 9.7B but bigger than it's spanish comps BNS (50M),FBP (60M), SBP (590M). Today the stock closed at $2.75 up 8.7%; the stock is currently trading 153% off its 52 week lows, -40% off its 52 week highs.

Technicals aside, BPOP has potential for long term growth for the following reasons: the Hispanic population is projected to grow 40% in ten years, 80% in 20 years, and nearly 200% in 40 years. By 2050 the hispanic population will make up over 30% of the US population. With an evergrowing hispanic population, it makes sense for BPOP so continue franchising in the US.

As I learn more about the fundamentals of financials companies, I will continue to post on this name. For now, the thesis remains that there is a need for a strong spanish bank presence in the US.

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A Major Step
Posted by Zachary G. - Freshman Equities Trader on Jul 8th, 2010 5:44pm

In just over a week our new website will be launched. Up to this point I have seen bits and pieces of our new format but remain anxious to see the pieces of the puzzle come together. Every day I witness several of my coworkers working endlessly to prepare the website and ask myself “what exactly are they working on?” Given the tireless effort I have seen from the media team, I expect the new site to be nothing short of extraordinary. Not only do I look forward to seeing the end product, I believe that the new site will be the binding force between the media and hedge fund aspects of our business allowing us to realize the full scope of the company’s vision. From the first day I entered the office I was told that this firm is not merely a trading shop but a revolutionary concept that combined traditional market strategies with a multimedia, interactive experience. While we have managed to strike a balance between these two seemingly separate halves, the website become the source of sustainable equilibrium. Finally, once we begin to aggressively market our website I expect our membership to grow exponentially. The notion of having hundreds and potentially thousands of listeners on our call is truly awe inspiring. I look forward to the exciting journey that lies ahead.

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VVUS Short Covering
Posted by Judah F. - Senior Analyst on Jul 8th, 2010 9:09am

At around 3:00 PM yesterday, VVUS traded up to $11.25 on heavy volume. The bump was due to a Bloomberg story released at 2:50 PM that detailed an interview with Eric Colman, deputy director of the FDA Division of Metabolism and Endocrinology Products. This is the Division of the FDA that will decide on approval for the obesity drugs submitted to the FDA by VVUS, ARNA and OREX. As we have discussed previously, VVUS's Qnexa and ARNA's lorcaserin contain ingredients that were present in Wyeth's Fen-phen, the miracle weight loss drug of the 90's that caused enough heart problems to force WYE (now PFE) to set aside $21bn to settle related lawsuits. Qnexa contains phentermine, a generic ingredient in Fen-phen that has been prescribed on its own for years to curb appetite, but bears were insistent that the phentermine - Fen-phen relationship would factor into the FDA's ultimate approval decision. During the interview Colman said "the concern with [heart] valves was limited to fenfluramine and dexeflufamine", which are other fen-phen ingredients that were banned from the market in 1997.

The FDA review panel for Qnexa is July 15 and a lot of fuss has been made about the drug's side effects. In trials, the most common side effects were dry mouth, tingling, constipation, altered taste and insomnia. There were no signs of suicidal behavior; a concern with Qnexa's other ingredient (epilepsy drug Topamax). Analysts have voiced concern over cardiovascular side effects, but VVUS says Qnexa has only improved cardiovascular health by lowering bad cholesterol and incidence of diabetes (resulting from weight loss). Before the final decision is made, the FDA will have to "weigh" the country's obesity epidemic versus the drug's side effects. Nonetheless, if the FDA review panel requests more trials, VVUS stock will plummet.

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Tech/Telecom Review 7/7/2010
Posted by Jeff T. - Freshman Equities Trader on Jul 7th, 2010 11:14pm

A strong day for the markets as well as the Tech/Telecom book which finished the day up 56 basis points based on the notional value and 3.62% based on the current value of the portfolio. The market showed nice signs of strength as growth sectors should strength and small caps out performed large/mega caps. The market finally opened up flat and we were able to see the market grind higher throughout the day with the S&P 500 closing the day up 3.13%.

The three largest names in the portfolio led us to the upside with GOOG, MA, and AAPL being the three largest winners. GOOG opened up basically flat before rallying till 11 before taking a breather between 11 and 2 before continuing to rally into the close. GOOG finished the day up 3.24% at 450.20 a dollar off the highs. MA had a strong day closing at 207.57 above yesterday’s high and short term resistance. MA ended the day up 3.77% at the highs of the day. The third biggest winner and third biggest position in the book was AAPL. AAPL closed at the highs of the day up 4.04% and rallied about 3 points in the last hour. DELL was the forth biggest winner in the book closing the day up 4.68% at 12.46. DELL opened the day down five cents but rallied the entire day and closed at the highs of the day. Although there was no direct news on DELL, 4,000 February 10 Puts went up on the tape at 11.28 am which suggests someone feels DELL shares have stabilized for sometime to come. Rounding out the top five winners was Take Two Interactive (TTWO) which rallied the entire day to close at the highs of the day up 9.43%.

There were no negative names in the Tech/Telecom book today and since this book is 100% long there were no losers today. We added small to the book with 13,000 dollars of DELL and 5,000 dollars of MTSN. We also sold roughly 5,000 dollars worth of MU into the strength at 8.65. Overall, we added 13,000 dollars of long positions to take the absolute value up to $621,618.

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Hedging the Trade
Posted by Zachary G. - Freshman Equities Trader on Jul 7th, 2010 7:50pm

Around 3:00 this afternoon, Dean suggested that the traders review their executions throughout the day to provide content during an otherwise slow period in the market. When I volunteered to go first, I saw Klein’s eyes light up; the Lumberjack Hour had come early this week. As I began to explain my trades, he posed the same question as last week: “did you think to hedge out any of your positions?” I told him I hadn’t and was unable to provide an acceptable reason as to why. When I informed Klein that I held a long position in Boeing, he suggested I double the position and hedge it with SPYs. After running this idea by Mark, I decided to enter the trade. Since I believed that BA was a name that showed relative strength compared to the market, we should make money on the trade during a rally because Boeing should rally harder than the overall market. Furthermore, if the market sells off, we will be protected to the downside with the short position. The trade ended up working very well and we realized a positive net P&L. After today’s success, I plan to put this type of trade into my arsenal and become more adept at maximizing its profitability.

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The Rip is Here
Posted by Annie F. - Freshman Equities Trader on Jul 7th, 2010 6:27pm

The rip in the market has finally arrived. Alas, we can comfortably sit in our seats and watch the green flash before us. It was a wild ride in this 3 month-long pullback from April highs. Our bullish thesis on the desk was tested and hammered on a number of occasions but as we continue to say the firm is in it for the LONG run. Despite taking down the book quite a bit over the last week, I believe we are in a good position to have a fresh start. The book has been nicely reorganized so that each of the traders is following a specific sector rather than an amalgam of stocks. My focus is on the financials and I intend to provide as much color as possible. Today financial sector performed exceptionally well; our basket of financials outperformed the market by appoximately 1%--JPM and GNW were our biggest winners.

The rip is finally here and that means that my one of two criteria for my investment strategy has been met. The S&P returns was 3.13% and I needed at least a 2% return from the lows.  About two weeks ago I finished a write up on the "Shock and Awe Investment Strategy" which is based on a quantitative market timing thesis. This thesis, which was formulated by our chief market strategist, suggests that when the S&P closes at least 2% above its lows of the day and on the subsequent day the S&P gaps up at least 45 basis points, the market will move right on up. I gathered data on this over the last 10 years and then applied an investment strategy. Since January 2001, this two criteria were met 23 times and of these instances the market moved considerably higher 21 times. I anxiously await tomorrow's open so that we can finally give this strategy a shot.

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