WHAT'S HAPPENING

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THE MARKET’S MOOD & MANNER

The market’s in a sour mood, and she’s got good reason. The market hit bottom in early March, then picked herself up, dusted herself off, and despite all odds (and negative data), stepped up to amazing highs. Despite her in-your-face bravado, though, she’s finally admitted some weakness. Her energy dissipated right after her January 19th closing high, and she’s finally succumbed not only to  pressure from Europe’s “challenges” (putting it politely), but she may be looking at some of our own, here in the U.S. Our stubbornly high unemployment rate, combined with rising state budget woes, and rising foreclosures would give anyone a case of the “sours.” 

Still, we did have a favorable earnings season, and bright economic data has popped up throughout the month. The trick to winning in this market will be more than ever, I imagine . . . being in the right place at the right time. 

Last week, the Dow Jones Industrial Average and the S&P 500 Index both rose 0.9%, and the NASDAQ 100 rose 2%. All three indexes are trading below their 50-day moving averages, and above their 200-day lines. A move below the 200-day moving averages would be a decided negative for these benchmarks.

STRATEGY SESSION

I’ve been trading for more than a decade. My style has evolved from the “jump into any four-letter stock that’s moving” go-go days of the mid-1990s, to a rather conservative, “just give me a clean, orderly chart pattern in a bull market” mentality. How did I morph from a card-carrying adrenaline junkie trader to one who derives great satisfaction from trading mild-mannered stocks that move in a methodical manner?

Experience, for one… rocket stocks only rocket for so long—and woe to the trader who doesn’t sell at the right time. Losses, for two, can be much bigger in the riskiest trades. And, we all know what havoc big losses have on our accounts and self-esteem.

These days, I really enjoy locating sectors and stocks that are flying under the radar and are just gathering energy to pop higher (or dive lower). Getting comfortably settled into a small position, or even just watching from the bleachers (putting the stock on my watch list) gives a great feeling of satisfaction—especially when the spotlight finally shines on my choice.

I know right now that everyone is running around looking for European bonds that pay rich interest rates. I’m also aware that many traders are buying and shorting the euro in everything from currency futures contracts to ETFs. While I’m not averse to jumping into some of these trades if the opportunity presents itself, let me show you a couple of under-the-radar indexes, in case you tire of the gut-ripping, front-page trading action.

Figure One is a daily chart of the Dow Jones US Food Retailers ($DJUSFD). Components in this index include Safeway (SWY), Kroger’s (KR), Casey’s General Stores (CASY) and Whole Foods (WFMI).  The food retailing industry group can be considered a defensive trade (we always need food), however, some of the stocks can deliver delicious profits when traded properly. Note that the index did not jump off the high dive after January 19th, the market’s recent high. 
   

Figure One:  Dow Jones US Food Retailers Index, Daily Chart

 RealTick® graphics used with permission of Townsend Analytics, Ltd.  © 1986-2010 Townsend Analytics, Ltd.

Figure Two:  Dow Jones US Toys Index , Daily Chart

  
 RealTick® graphics used with permission of Townsend Analytics, Ltd.  © 1986-2010 Townsend Analytics, Ltd.

Figure Two, above, is the daily chart of the Dow Jones US Toys Index ($DJUSTY). Components include Hasbro Inc. (HAS) and Mattel Inc. (MAT). The toy industry is currently holding a big conference in New York City now, which has surely added to index volume in recent days. Once again, you’ll notice that the index did not pullback dramatically during the recent market downturn. In fact, both indices are trading above their 50-day moving averages and don’t seem at all perturbed about the frantic events swirling around the globe.

This is not to say that these conservative, under-the-radar indexes can’t take a sudden tumble. No group is immune from market weakness, not even food and toys.

Still, when the market gets volatile, this former adrenaline trader takes great satisfaction from finding mild-mannered groups and stocks that offer easy-going profits.  

Keep green on your screen! 

  Visit Toni Turner's Website at www.toniturner.com