I was only able to look at me screens for 10 minutes, which is not enough time to really scour for the best ideas. These ones stood out during my cursory glance.

Up minimum 11 days in a row:

(MMR: 33.06 +1.85%) and (CRS: 60.20 +1.02%).

Out of these, I’d say MMR is shortable. Remember the inherant limitations of this method and that this is the top sector currently.

Oversold (should bounce):

(GENC: 16.18 -5.88%)

Strong Moves:

(OSTK: 24.81 +13.81%) - rec’d 3 days ago at 21.96. Skip

(TITN: 23.52 +10.89%)

(JRJC: 26.15 +18.65%)

(LVLT: 3.55 +8.23%)

(NED: 7.99 +16.47%) - I think will run futher, but so speculative and Chinese, and gay, I’m not going to touch it. Reminds me of my KUN rec the two days ago, which then preceded to go up 43%.

(PCX: 93.25 +7.88%) - extended, but on a pullback, this looks tits

(MELA: 7.95 +13.25%) - spec, interested above old highs

(PDO: 15.74 +6.06%) parabolic

Other Stocks on My Radar:

(ONNN: 10.3899 +3.90%)

(ARG: 60.10 +0.91%)

(HP: 61.26 +1.88%)

(EAC: 57.59 +2.44%)

(ARA: 88.04 +0.85%)

(DGLY: 10.64 -1.66%)

(APWR: 22.50 +1.58%)

(MEA: 16.09 +1.84%)

(LEAP: 61.0899 +1.77%)

^lots of low quality names. The point of this scan is finding stocks that have broken out and are starting a real move based on some type of earnings catalyst. I select the names I’m interested based on the general chart pattern, then go and research why it made the move.

STAY TUNED FOR THE NIGHTLY iBC MACHINE UPDATE 

PS: check our ragin’s screener!

sent via cellphone:

I know you all want to see the face, but sorry, I’m not trying to blow up my spot.  Just assume it is good because it is.

Sort of a veiled reference to Uncle Howard there. (Hey Unc, it was my b-day in April, where’s my present? Spain was probably present enough, I guess, belated thanks for footing that bill. Lindz, you’re a scholar and a saint and I mean that).

More pressingly, the Financials have to power to take use lower…or higher.

It should come as no surprise to you that whatever these pieces oh shit decide to do, it reflects magickally [super joking sic] in the illustrious iBC Machine.

(XLF: 26.39 -0.42%)

1 month:

9 month:

Something to keep in mind.

I have a small position in (SMN: 27.40 -3.08%), and it fucking sucks. The ag stocks have died and SMN goes lower. Even the non-ag components like (APD: 102.32 +0.13%) are pissing me off. FWIW, (PX: 95.04 -0.25%) is better. Although I haven’t lost much money on this trade, it is safe to say that is perturbs me.

It is like receiving a plate of fresh biscuits knowing damn well that there is no butter. It is like playing The Lottery next to a granite quarry. It is like buying CFC. Or worse, it is like listening to a baseless cricket without the infallible midge to offset.

Enough of that.

(POT: 207.00 +1.40%)

(APD: 102.32 +0.13%)

(MON: 125.11 +1.16%)

(SMN: 27.40 -3.08%)

Still long, chagrined, and slightly stupid. A glutton for punishment you could say.  Or a retard.  Soon, this colostomy bag idea will be over, at the famed “Death Line.

This is the inaugural iBC Machine Daily Update.

The updates won’t ever be this long, I just wanted to take some time to explain The Machine and how it works to aid in your usage of it.

A little bit about The iBC Machine:

The Machine is a count-based indicator. That means it counts the number of stocks meeting certain conditions, over certain common time frames. The point of counting the number of stocks meeting certain conditions is that is paints an internal view of the market that you miss if you simply watch the price.

The way the machine is generally interpreted is at extremes, or when some measures cross over.

The iBC Machine was modeled off other oscillators, and most specifically, the Worden T2 indicators.

Here is an example of the T2108, which counts the % of all stocks trading above the 40 day MA. I plotted it against the S&P500, and added the upper and lower boundaries, which I just eye-balled. The way a lot of these work is mean-reversion. When you hit the extreme, you bet the other way. This is the core of Woodshedder’s RSI(2) strategy, which I very much enjoy.

This particular indicator is a better “bottom caller” than “top ticker,” but, I can tell you, I’ve fine-combed each top in the oscillator, and it did perfectly coincide with a market pullback. Some were half a percent, others in the double digits. The reason I put this up is for an illustrative example of the type of reasoning that inspired The iBC Machine. This oscillator also illustrates why bottoms are easier to call than tops.

Moving Averages are not concrete enough for me however. The iBC Machine measures price action that is both normal and anomalous.

Each day, people are buying or selling a market home to over ten thousand tradable securities. Each day there are a thousand opportunities and ten times as many interpretations thereof. When keeping track of all the upgrades/downgrades, Uncle Ben’s, and Gasparino sit downs, it is all too easy to have information overload.

By focusing on only the number of stocks meeting extraordinary conditions as defined by price movement, volume, or rate of change, you can quickly paint the enthusiasm and mood of the market in a unique way that gives you a tradable edge. You tune out the mundane, and focus on the core.

The exact parameters are secret, but it measures conditions being met that day, over the course of a month and over one quarter. It measures other conditions on a monthly and quarterly time frame. All of the conditions overlap, so visually, when they all say the same thing, that is the most opportune time to buy [sell].

This is, again, purposefully similar to other commonly used indicators. Ever wonder “Whats with using the 50 and 200 day averages all the time?” These are close to the measurements of the number of trading days in a quarter (65) and year (260). So measuring relevant and anomalous conditions of stocks in the market over these time frames is par for the course.

Then, I compared the spreads of these indicators. I use a regression to the mean assumption, which I proved exists in this indicator, to determine again the proper timing for buys and/or sells.

Then you can compare the ratio of spreads to have an even more acute view of the indices, again over numerous time frames. When the numerous time frames agree is when you have the highest success rate and the biggest directional edge.

Now that you have some background on the machine, let me go over tonight.

Here is a picture plotting the REAL buy and sell strength of each day, along with the ratio between the two.I made the ratio visible, as it is designed to show how much stronger today’s buy interest is over yesterday. This reveals the imbalance between buying and selling, which is what we care about more than how much the S&P moved that day. Highlighted and annotated I’ve shown how there was clearly more buy interest at the March 18th lows, and that the buy interest was extremely high.

For the last few days, buy interest has been tepid. The May 12th rally had more buy interest than today’s 94 point rally did. It’s a little hard to tell, but the line above May 12th is high than today’s line.

Moving onto the monthly time frame (not shown in chart), which is what I use to assess overbought or over sold conditions, it is registering as slightly overbought, so until that condition wears off, I am hesitant to put on new trades.

The longer term measure, the quarter indicator (not shown in chart) shows that stocks are still positive, and that this mini bull rally is still alive, even if a bit extended. The way to use the quarterly information is under the assumption that if a trend in the marketplace has existed for more than one quarter, it is real, not specious, and deserves your attention.

How do you assemble the pieces to come up with some analysis that gives me an edge? Here’s the picture I see:

We are a smidgen above the 200-day moving average, which was serving as resistance. I need three days of close above the 200-day and a successful test for me to consider it as support.

In other words, our current location is something to be wary of. You know that buy interest has been weak lately, that is has gotten weaker as prices have gotten higher, and that the monthly indicator is reading mildly overbought. The bottoms in Jan and March were met with strong buy readings. If this market is going to break above 1420 / 13,000, meaningfully, I’d expect to see a lot of participation, not such a narrow rally as evidenced by the lack of daily buy strength. See how it’s coming all together?

The iBC Machine is showing relatively weak buy interest up here, and though we remain in an intermediate term (quarterly) uptrend, the more opportune time to add to positions or engage in momentum trading is when the Monthly oscillators become less overbought, or we have a high conviction buy day. While is is not uncommon for overbought conditions to persist for days following the first reading, they always resolve in one of two ways–The indices trade lower, or the indices flatline while overbought conditions are worked off.

All these factors mean that the edge is to NOT PUT NEW TRADES on, and be quick to take profits on the recent profitable trades you may have made. Conversely, you could cut the risk in half on trades, or, at the absolute minimum, prepare your stomach and mind for your positions to trade off over the next week.

The beauty of this is that it brings us to the “show me stage” of the rally. If we go up more, then The Machine will be too overbought, which increases the likelihood of some selling. Best case scenario is that we dick around here and test the 200-day. Then we have another huge buy interest day, reflected as a spike on the chart. This should alleviate the overbought conditions, all while showing real buy interest, giving the continuance of the rally more credence.

Remember, the key to the spread chart shown above is understanding the strength of the move, not playing a reversion to the mean strategy. That is how you read the other charts, which I will post in other updates.

Well, there it was! First iBC Machine Report!

Damn, quite a doozy. If you have any questions, recommendations, comments, additional clarifications, whatever, be sure to go fuck yourself. No, c’mon, I’m just kidding, of course I would love to hear ‘em.

I am trying to figure out what I can do to help you all more. I have a lot of resources at my disposal, some of which are pretty basic and I pay for, like generic briefing.com news, while others I developed over many months and countless hours of study. I use Blocks 3.0 to do some pretty complicated and awesome shit.

I know some of you are interested in the iBC machine, a proprietary breadth and momentum monitor, approved by Fly, Shed, and Rage. I have gone back to the 1980s and the iBC is amazingly accurate at foretelling (as in, before the fact, not after the huge drop) changes in market sentiment. It does this by measuring a variety of count-based indicators, which are comparably over time, unlike MACD and RSI. This can be used to time trading on a day to day basis, month to month, or for longer term investors, quarter to quarter.

I find it indispensable in my trading and in my timing. After all, timing is everything. Just ask the plane girl. Or the sellings of BSC on March 12th.

Aside from using the machine for general market timing purposes, I use 20% of my capital to trade its signals, at the extreme. I haven’t executed any trades in that account since I’ve been back, but the 1 month return prior to my trip was 8% net of all fees. The only instrument I bought or sold was the SSO. So, I’ve put my money where my mouth is, and I believe strongly in the machine.

I want to make the machine an indispensable part of your trading day, much in the same way it is critical to mine. I plan on doing a daily column, but thought I may as well ask about some other ideas I have to improve your trading life. The iBC machine update before the close will help you buy or sell before the fact. Sometimes, if you wait until the next day, the market has already gapped. Or, I could do both. An end of the day “here’s where we stand,” along with more detailed analysis nightly about the relationships or changes taking place.

Please vote and let me know how I can best focus my efforts to add to the quality of the blog.  You can vote for more than one thing.

Big Companies, Big Moves

(SNE: 49.50 -2.04%) - earnings and guidance

(DE: 83.53 -0.10%) - disappointing guidance, co says raw material costs a problem, despite records sales. Get long the price makers, stay away from price takers.

Small Companies, Big Moves

(KONG: 4.59 -11.39%) - Totally speculative, all the burritos are running today. This one looks like it could have more upside though.

(AMSC: 30.83 +4.65%) - Alternative Energy

(KUN: 4.9499 -8.34%) - Chinese Carp[sic]

(EMKR: 8.11 -0.25%) - another semi

I am tired of listing all the semis and Chinese stocks, they’re basically all popping bottles at da club.

Oh snaps, we got a rally.

What to do with it?

I am not buying up here.  We’ve got the 200-day to contend with, and the iBC machine still showing overbought.  Overbought is bullish, generally, because how does one get to that state except in a bullish envirnoment?  In any event, there are more opportune times to buy, up 130 on CPI data isn’t the time.

I’m still under invested from a trading standpoint, as I sold all my trades before I left, to free myself of the worry.  I kept (DGLY: 10.64 -1.66%) and (VHI: 28.58 -0.07%),  both of which are kicking the aged down steps.

A little more about DGLY:

The epitome of a massive earnings explosion.  Same thing happened to RICK.  Same thing happened to BIDU.  Same thing happened to POT.  If you want a stock trading lesson (Fly is a gracious leader for bestowing such blogging knowledges upon the unwashed, feral, and derelict masses) it is simply go long stocks which break out due to huge earnings.   It is the one underlying characteristic of literally all stocks that make large, protracted moves.  How huge is huge?  Thanks in advance to to briefing.com:

DGLY, which makes video surveillance products for police cars, broke out to fresh multi-year highs last week (dated 4/21) on news that it signed a contract that will allow law enforcement agencies in Utah to purchase the co’s in-car video systems. There are a number of positive catalysts that could bring added attention to this interesting but lesser known small-cap name… DGLY’s flagship product is a small Digital In-Car Video system that is integrated into a car’s rear view mirror. It also allows for wireless file transfer and has live streaming video capability. The stock just recently moved to the Nasdaq from the bulletin board in Jan, giving it added legitimacy. More importantly, the co swung to a profit in 2007 and expects to show continued solid rev growth in 2008… Looking more closely at DGLY’s earnings, we note that revs jumped 370% in 2007 to $19.4 mln, with the co swinging to a profit as EPS jumped to $0.28 from ($0.26) in 2006. The co expects revenue to more than double in 2008 to $40 mln… Looking at valuation here, using the co’s 2008 sales guidance DGLY is trading at 3.25x forward sales… Mkt cap $130 mln, float 9.7 mln, avg vol 58k

I noted yesterday ALTR ONNN and some semis were doing well, and that was reiterated by the Cajun and his magical, money-making screen.  It should come as no surprise to you that me and Ragin’ teamed up will find all the best money making ideas.

Natty G is still leading, while Housing stocks remain strong, and gay. Housing may be gay, but it isn’t ricockulously gay, like the airplane stocks.  Maybe, at some point, I could see myself buying a gay housing stock, not like there is anything wrong with that, but I would rather play Russian Roulette with a shotgun than be caught buying an airplane stock.

(MLI: 36.07 +0.33%) - is up 11 days in a row, an event so rare that out of 7150 stocks, it is the only one meeting this criteria. These have been profitable 1 day shorts for me in the past.

As I have previously mentioned, the problem with this strategy is that maybe tomorrow you get a down .5% day, and that’s the end of it. Or, maybe it moves down 10% over the two weeks. You can’t tell, so the gains on these trades are usually very small. I’ve just found that the statistical likelihood of being “right” (stock goes down on the 12th day) is extremely high.

I see a lot of horsehit semi’s doing well for some reason or another:

(ALTR: 22.98 +0.13%) and (ONNN: 10.3899 +3.90%)

On the back of (FLR: 191.37 -0.14%) news, you have (ABB: 32.69 +0.77%) and (FWLT: 79.60 +1.23%) looking great. These are all “buy the dip” situations, provided the market stays healthy and these stocks remain above support.

In a similar vein, (GTI: 24.67 +2.66%) and (GDI: 51.46 +1.54%) are both winners.

Stocks that are oversold and due for a bounce:

(OMG: 47.85 +1.29%)

(PSUN: 10.91 -1.18%)

(AMCN: 18.95 -1.30%)

The iBC machine, for the close, is still looking weak, and slightly overbought. This makes initiating new longs, especially into momentum stocks, less opportune than at other times. Based on the weakness of the Machine, I would enter into the oversold trades, or the short MLI trade, before the momo ones.