Assessing the Odds of the Next Move Up...or Down.

Watching the markets very carefully as we approach a 200 day moving average at 1114. For those still focusing mostly on Dow Jones, the 200 day ma was conquered on Friday and there is follow through today, a positive sign. There is definitely some resistance at 10,500. Ditto for COMP, but if we clear this major overhead resistance, there is some room for the market to run. Still, my inclination is to sell resistance, and take some profits although I am still positioned defensively. The first to go will be WMT and TNA bought on Thursday. Both have stops slightly below current levels and will be sold at a profit. I am not shorting this market, other than a few option hedges listed below.

I am experiencing some pain in SLB,(no it is not a body part, but a large international drilling company),the stock was downgraded to neutral by several sell side firms after posting less than stellar results and not really providing much of an outlook. Although I am down about a point or so, I believe I missed most of the downside and expect to see the stock stabilize here and rebound.I may have been a bit early pulling the trigger on it, but I think the reasons the stock got hurt this quarter are temporary and short term in nature (Gulf of Mexico drilling moratorium which may last 6 months and some slow down in international operations). I see the downside limited to 56.

BAX - which I bought on Friday morning, has been a winner thus far, partially from an uptick in most healthcare names on rumors of GENZ takeover by GSK or SNY. This was not a reason I bought the stock, however. The three main reasons were: 1) BAX has underperformed the group, while the healthcare in general, has lagged the broader market. 2) Goldman has upgraded the stock and added it to its Conviction List, recognizing that the business have likely bottomed. 3)Valuation is reasonable and provides some downside protection with the stock ~5%-6% from support.

The volume has remained anemic and the the activity pretty much dies after 11 am. Its a type of market that generally trades on technicals in the absence of major news, but given that it is only a fraction below a key resistance and momentum indicators are short-term overbought, which makes it pretty vulnerable to a volatile correction. In other words, the risk reward is unfavorable. I would rather see it move and close aggressively above its 200 dma and I will jump back on for a ride to 1150. If there is a correction, we may see it take the market down all the way back to 1080 on the SP and 1150 on the Dow.

Since we are no longer using Marketguru.com to track our trades, positions and results, I will try to post them on my blog as timely as I can.

Current Longs: AAPL*,FCX*,MOS*,DNDN*,NKTR,BAX,WMT,TNA,CEF,JPM,GES,GGN,REXX,CELG,DVN

Current Shorts: August Calls (APPL,FCX,MOS,DNDN).

Cash/Bonds ~ 50%-55%

*Hedged with short calls