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I recall the hours and hours of research, and the reams of charts I’ve looked at in the past few days, weeks, months. Realizing none of my trades for the day had anything at all to do with this research: All of it purely reactive trading designed for market making. When taking purely scalp trades, triggered from reactions to the tape, one has to also be making a market in that stock, otherwise it’s a losing proposition. Realizing there are only 45 minutes left in the trading day, I load up on the four most potent trades I had recognized the prior day. In those 45 minutes, I put “paid” to the notion of scalping. Making markets is good for those times when trading conditions are terrible. Unlike now, when there are too many opportunities to keep track of.

As I was saying, today’s housing numbers were a game changer. All bets are off for the bears being able to hold the line here. Because up until now, the rally has been purely within the boundaries of a technical correction. Today, during the firms live Macro Trading show, I laid the case that underlying conditions, as I have been saying since mid February, have become favorable for stocks. Now, March 8th is in the rear view mirror, and although it was a hell of a ride and a powerful one, I think it was just the first salvo of many to come from bulls with enormous amounts of dry powder to use and abuse the overly short retail traders that keep stepping in and getting run over.

Now that we are challenging the technical boundaries of a correction, and in some sectors where you can see signs of early leadership, I do not think the bears will be able to hold the line. Their only defensive responsibilities are right here at these key technical levels. Last week, I mentioned several long time short only hedge fund managers had converted to the other side. Kynikos, Greenlight, Grant, and a few others have accepted the inevitable. This massive wave of liquidity, like a river flowing in only one possible direction, will find the path of least resistance to get into the system.

The yield curve has steepened to a level that right now, the most profitable business to be in is banking.

This is a game changer. And if you think I’m just a raving lunatic that writes for himself, you’re right. But I also know how to read my instruments. I relate this to a fighter pilot becoming disoriented during pitch black conditions, and losing his sense of up or down. At that moment, if that pilot goes with his instincts, he’s dead. If he reads his instruments, he’ll live. So regardless of my frantic screaming and jumping up and down on my desk as a raving bull, put down the Post and read the instruments. And if you don’t know how, you can spend the next several years learning, or you can tune in to T3Live.com where I discuss it in-depth every week, and when I’m not saying anything of importance, you can put me on mute and listen to any of the other 4 unconditionally committed pure blood traders on the radio. www.T3Live.com Free trials all around, I’m buying.

Lawrence Summers, senior economic adviser to Barack Obama, US president, told the Financial Times recently that the Group of 20 countries should agree to boost government demand. On Monday Christina Romer, chair of the White House Council of Economic Advisers, said: “The more that countries throughout the world can move toward monetary and fiscal expansion, the better off we will all be.” (emphasis mine)

Jean-Claude Juncker, chair of the “eurogroup” of ministers, said: “The 16 finance ministers agreed that recent American appeals insisting Europeans make an added budgetary effort were not to our liking.”

But European ministers are concerned that building up more government debt would threaten the stability of the eurozone and say that they want to assess the effects of spending boosts that have already been passed before considering more. The US Treasury declined to comment on their remarks on Monday.

A new European Union policy paper, due to be approved by finance ministers today, calls the prospects of a return to economic growth next year “highly uncertain”.

Ouch. I do recall hearing this over the audio squawk during market hours, and the market went into a sharp sell-off. These days, that’s more likely to be a bear raid during a vulnerable moment in the tape. Either way, a professional trader should not forget to pay attention to these minor details.

After the powerful bear market rally of the prior two days, gold and bonds are both being bid higher. The Yen is starting to rally. Asian stocks couldn’t pick up on strength in US equities. Market breadth is deteriorating. Watch out below…

Campaign - Position trade 2nd tier financial names. Continue to focus on gold stocks and buy on dips, sell into rallies.

PRIORITY- Volume climax in financial names. Short-term trend exhaustion. Dow recovery of 7450 level short term reversal in progress.

Week of Feb. 23

Dow showing multiple pos. divergences with Friday’s doji low. Watch 7450
for recovery. Q’s at 29 major support. SPY near TD9 buy.

POT inv. H&S n/l b/o. Watch MOS too. Put alert for SQM 24/26
PCLN running away after breakaway gap over 200dEMA.

ERX/OIH-  ready for rally here. FSLR high vol. reversal could rally to 150 entry
around 129-130 or >135. GSG TD buy signal confirmed and qualified
good for 3 points. USO TD reversal qualified. UNG close to TD.

Watch airline stocks. DAL showing bullish sticks with $4 July ’07 lows very
close and trying to close above $5. LCC TD16 buy watch for recovery of
3.16. UAUA huge vol. reversal.

SKF target $244.  Watch FAZ around 88-89 for short entry. Watch FAS for accum. around $4-5. JPM high vol. doji at critical support.

The new momo theme is “discounted premium fast food”. Model and monitor: BWLD, AIPC, CMG

MRVL neckline failure about to recover.

SHORT:  BTU, AAPL (watch q’s at 28.96),

Trades:
#1-
Watch BTU on the open. If open is equal to prev. close (28.25), stock
is opening outside primary major downtrend line. This could trigger a
short covering rally to back to $30-$32 area, where it sets up a
powerful short trade for a recovery of the primary trendline, similar
to last week. Below $28, the d/t resumes without a false breakout.
Above $33 then d/t line has been broken as a major trend reversal.

#2
CME- Watch open. If opens <190, there are 3-4 points short to $185.
Long reverse for quick scalp. Downtrend likely to resume if <183.
Fib targets: 179, 171.50. <170 targets new trend lows. LOW risk
entry SS L $199-200. Also monitor this area: $196/.50
If $189.30/.00 area holds, BL with target of $195-197 – $200, for perfect reversal SS at low risk entry level.

#3
STI- TD9w buy signal. Very accurate. Selling climax. Huge bounce coming. Positive divergences.

#4 CRM- Qualified TD9 with confirming vol. Recovered prior low to present possible 2xB 25.86. VMW similar setup

#5 POT/MOS & LIFE- uptrend and at multiple MA cnvrgnc.

This potential bottom almost looks perfect. Do we go in aggressive early and keep buying dips? I think that’s the play here.

NTRS- Strong rel. strength. Did not follow sector to new lows in Jan.

All of the following are giving qualified Sequential buy signals:

SPY: Also inv. H&S

ABK- Buy $1.10/.18. Target $1.50

MBI-

BX- Good signal.

IAI- Broker/Dealer ETF

XHB- Homebuilders ETF

PNC- Almost perfect signal

STSA-

STI

MTB

MI

RF- Compelling but high risk. Take small

STT-

HBAN-

IVZ-

JNS

JEF

LAZ

LM

NYX- Might be early

AGM-

FIG- inv H&S

SHORT:

KBW- on a rally

JPM- Top name. Target size is 3 boats. Work hard for it. Confirmed/Qualified 12 count.
Assume all insiders have been massive buyers over prior several weeks at unheard of prices. This is where crowd psychology starts to shift, and the beginning of the momentum shift is always the toughest AND most profitable. FOCUS…FOCUS…FOCUS…

MS- #2 in sector. Amazing accumulation all day long.

If SKF < $149 then 134, 127, 123.50. If enough stock not in inventory, look at FAZ short (non-threshold stock)

Homebuilders at lower end of this base. I see this group as a leader over next several quarters. Perfect pscyhology trade: CTX, LEN

OIH/ERX/USO/UNG- Confirmed 9 count with nice looking stick. Entire energy complex poised to readjust for some recovery of demand. Spread between WTI and Brent closing, indicating a market in less distress. Will there be too large of a gap? Note, nat.gas stocks deeply depressed and heavily shorted (CHK, CNX,

FAS/BGU- Wow, this is a first. A confirmed AND qualified 9 count reversal in a triple LONG ETF. Load the boat.

UYG- Red flag on Dow Jones US Fin’l Index. Today was an inside day to Tuesday’s massacre on huge volume. Action should be in commodity and infrastructure stocks; use financials to balance Long/Short book.

BAC- 10 count, unqualified but VERY close. Anticipate qualification if possible.

CME- What a powerful rally all day. Very impressive and shows enormous velocity. Much energy still remains in this rally. Manage Thurs. gap and ride back to $225.

CRM/VMW- Expect big upside gap, but certainly confirmed pivot. Would like to catch some of this move to $35/$26.

JBL- Nice pivot. Back to $8. Also: MRVL, MBI

WYNN- Unqualified 9 count. Watch.

CAT- This could be final pivot I was waiting for. This is the “infrastructure” general.
X- Perfect base built on $30. To $38 first stop.
AKS- Excellent oppty. to pick up under $10. Last call before this ship sails…
ACI- Similar base at $16. Good for pivot reversal to $20. Huge positive divergence in Money Flow during last break to new lows in November.
AGU- Same set-up as ACI.

Look, all correlations are still at 1, so why spread out across so many names when we can just take a massive position in one of these? See if there’s any edge gained from building portfolio versus acute concentration in a few names.

Airlines downgraded on a day like this? What does this remind you of? Back in the days when big boys would downgrade in the face of a rally as large institutional clients have unfinished accumulations in the pipeline at specific price zones. This is cash money to the firms, they need these orders filled or it will decimate their month-end post-trade reporting. Most of the pain taken by American anyway. Others sold off from arbitrage traders.

AAI- Buy this already and stop looking at it. This is silly. Get long and strong.

Got to watch solars. This is their line in the sand where this rally should take off. Positive wires on solar and Obama today and should likely continue.

The analysis from Jan. 5th is applicable to this coming week, referring to the pullback I would like to see, and to what levels, before I would start getting excited about buying US or global equities…