As early as October 5th, access to the HEDGEfolios database of fundamental and technical analysis will be primarily limited to institutional investors.

Regardless of investing experience or the size of your assets under management, I hope you have enjoyed using HEDGEfolios over the past 5 years.

Using Monday’s closing prices…..of the 3,150 stocks I cover with HEDGEfolios, 95% are higher than they were at the beginning of March.  The average loss was -15% with a median of -10%.  The average of the winners was +110% with a median of a 66% gain.

So what!?!  Given that the S&P is up 60% since the March lows, I guess those figures are not as remarkable as they should seem.

After all, from the beginning of September 2008 to the beginning of March 2009, 97% of the 3,150 stocks declined.   The average and median loss were approximately -50%.  The average gain was +15% with a median of +11%.

Let’s say you buy into the notion that many stocks are just getting back what they lost from last September to March when the index dropped about 45%.  Maybe you believe that the credit crisis and the Lehman failure or AIG bailout or some other problem from back then unfairly whacked almost every stock to levels that were not representative of what should have been “fair.”  If that were true, then I can imagine something like a stock that lost 50% from September to March and then gained 100% on the rally.   And that certainly happened with quite a few stocks…about 20% of the stocks are within 10% of last year’s price.  As I pointed out, about 95% of the stocks went down on average to match the index during the decline and about 95% went up with an average that mirrored the index’s rally gains.

But those are averages which happen to include quite a few extremes and I encourage you to do some analysis of your own.  If you do, you’ll find about 1600 stocks in the HEDGEfolios universe that are up greater than 60% since the beginning of March and over 100 have appreciated between 400% - 3400%!

I encourage you to decide what you consider “extreme” and then try to justify it.  For example, what were valuations like last fall, last spring and now?   What has changed about the company or its industry relative to macro trends?   Can you objectively look at the gains since March and find reasons why current prices are justified by the company’s financial prospects?

You have to decide for yourself when to buy and when to sell.   And in my opinion, it rarely makes sense to sell something just because it has gone up “too far or too fast.”  But if you cannot explain why a stock with declining revenues, no profits over the past year, no forecasted earnings for the coming 12 months, etc. etc. keeps heading higher at rates much faster than market gains, you better pay extra attention.  Because whenever the powerful forces that are propping up such a stock decide to leave, there may be no fundamentals or technicals to prevent significant declines.

Here are a few stocks that I am watching.

AAI, ACTG, ADAT, AERT, AGEN, AMAG, AMCC, AMCS, AMSC, AN, ANAD, ARQL, ARRS, ATE

AVII, AVNR, AXL, BCRX, BKI, BONT, CADX, CAMP, CAR, CCE, CHS, CKEC, CLZR, COT

CPWM, CRAY, CROX, CS, CTB, CVTI, CWTR, CY, DDS, DECC, DIN, DITC, DNDN, DSCM

DTG, EEFT, ELGX, ELON, EPAY, EVR, EXEL, EXPE, F, FLML, FORM, GERN, GOL, GPI

GSIC, GSS, HEB, HGSI, HTZ, ICTG, IFON, IMA, IMAX, ISPH, ISTA, IVAC, JEF, KBW

KLIC, KONG, LCAPA, LCAV, LEN, LNET, LONG, LORL, LPSN, LSCC, LXRX, LZ, LZB

MDVN, MERX, MFN, MGI, MNKD, MOVE, MRNA, MU, MVIS, MXWL, NAK, NANO, NAVR, NENG

NKTR, NVAX, NVDA, NVTL, NWK, OFIX, OMTR, OPWV, OVRL, OVTI, PAG, PALM, PBY, PHH

PJC, PLAB, PMI, PROV, PTN, RAD, RDN, RDWR, RFMD, RT, RVSN, SALM, SBSA, SCON

SCSS, SEH, SFN, SGEN, SHFL, SHI, SLXP, SMOD, SMRT, SNDK, SNIC, SNS, SNTS, SPF

SPPI, SUPG, TBBK, TELK, TKS, TLAB, TQNT, TRBN, TUTR, TZOO, UBET, VCI, VECO, VICL

VIMC, VMED, VNDA, VVTV, WGO, WLK, WPP, WPTE, WSTL, XJT, ZHNE, ZRAN

Dollar down….stock market up.   I know it’s easy to buy into that correlation right now..just overlay the charts or listen to some commentators on financial entertainment.

Apparently that’s all the credibility some people need to convince anyone that wants to be convinced of what they already want to believe.

And if the dollar eventually heads higher at the same time stocks start to fall, well then I guess it must be true.

While I am confident that the dollar’s destruction is contributing to price movements in other asset classes, especially oil and gold, I don’t put much belief in the causal effect with higher stock prices.

We’ve had this fascination with currencies and stocks before…in March 2007 with the Japanese Yen.  Click here for a refresher.   So now I guess, the US dollar has truly replaced the Yen as the carry trade currency!!  How pathetic is that if it is true?!?

Please remember the differences between the terms Causation, Correlation, Chance and Coincidence.

If you look at the move from March until now, the dollar decline and the S&P increase seem like proof of whatever someone might want to claim.  And since July, it’s been especially easy to talk about.   And more recently….since the beginning of September…pretty impressive.  Are you already convinced?

However, if you look at specific days or groups of days or maybe even a month of days during this rally, you will find exceptions that should cause you to question it.

For example, consider the USD appreciation from March 19th to April 21st of 4.25%.   During this same period, the S&P also advanced…to the tune of 8.4%.

Point is…it is really easy to make observations and find what you want while ignoring examples that disprove the theory.  It gets even easier when you use a very small set of recent data points that happen to have almost perfect correlations and then disregard any set of similar or larger data points that happened just before the current period.

Regardless of what the commentators see.  Regardless of what the chart overlays show.   Regardless of what I say.   It really only matters that you make up your own mind.

But more important than what you believe is what you do.  Let’s say you buy into the dollar down, stocks up phenomenon.  So what?  Do you look at your portfolio and sell stocks on the day you expect the dollar to head up?  Do you buy them back if it goes down?  Maybe the quants can do that, but I doubt it works for anyone else.

In my last performance update, I mentioned that I expected a downside target / support level on the S&P 500 of 908.25 at the end of September.  At the time, I was expecting a decline that has since turned into a breakout rally.   Clearly, I was wrong.  I also promised an update if my end-of-month forecast changed…so here it is.   I am no longer expecting a decline to 908.25.   The slope of such a move would be so extreme that it would require multiple negative catalysts and macro problems that I just don’t see happening over the next two weeks.   Anything is possible but the probabilities are low.   I reworked my analysis of individual support levels and applied the index weightings.   If there is a pullback, I would expect to find support around 1001.   Given that my prior forecast turned out to be so wrong, I don’t know why anyone would care about my revision.  I’ll leave that up to you.

I often refer back to posts I have written over the past 4 years or provide links.   From time-to-time I take a trip down memory lane and reread much of what I have written here.   So to make it easier on myself and maybe provide some enjoyment to anyone that likes to peruse old stuff, I will be flagging posts that I feel are important…for their predictions, for their warnings, for their ability to help investors or just because I found them humorous.   To be fair, if I find something that turned out to be pathetically wrong, I’ll create a special category that is the opposite of this one.

Have you heard a lot about how bad the abolishment of the Uptick Rule has been for stocks and volatility during the last 6 months of rally fun?  Me neither.

A year and a half ago I ended a post called “Uptick Uptake”  with this line…..

This argument about the uptick rule or any other “unfair” advantage for shorts will disappear once we have a real rally.

So now that we have had a “real rally” over 55% from the March lows, when was the last time you heard Cramer or any other person previously obsessed with the Uptick Rule rant about how we need to bring it back so that we could avoid stocks going down?

Here is the last one I could find from Cramer.  That was 4 months ago.  Can you find others that are more recent?

If the Uptick Rule is so important, it needs to be as important when stocks are going up as when they are going down.  And yet, there is mostly silence now.   Go figure!

I fully expect to hear the nutjobs blame short sellers and call for reinstating the Uptick Rule when stocks eventually decline.  We cannot have stocks decline …can we?

And since early March when Congress (say Barney Frank) encouraged the reinstatement of the rule and the SEC has completed its re-review and comment period about the topic from April to June, isn’t it great how nothing has happened?   HMMMM!  Do you think it’s just a coincidence that despite Rep. Frank’s desire to have it in place by April that Shapiro and the SEC decided to postpone a decision since August?  I don’t.   I think it is an arrow intentionally held in the quiver so the next time we have a decline, it can be used to avoid a problem.   If you love when your government intervenes to prevent markets from going down, you should be happy they did not waste the Uptick Rule reinstatement.   It may take a while, but sooner or later, it will be used and then the Uptick fanatics will have to find new excuses for volatile markets that happen to go down.

When stocks decline, we hear the word “oversold” coming from technicians and non-technicians at a frantic pace.   As you should know, I try to avoid using technical analysis jargon as much as possible because I feel it is unnecessary gibberish and the words “oversold” and “overbought” are at the top of the useless list.  If you search my blog for references, you’ll find almost every time I mention these words, I am ridiculing their overuse.  Here is one example from 3 years ago.

Call it hypocrisy or whatever you like but I am about to call this market as I see it ….not overbought….just UNDERSOLD.   Volumes are not high enough to suggest this rally is what some supposed technical analysis gurus call “overbought”.   There is a great absence of selling and that situation does not get worked off with one of my other least favorite market explanations …profit taking.  Undersold conditions do not get overtaken by short selling but it does get accelerated by the reduction in short interest.   Undersold conditions end when bulls fall all over themselves to sell long-only positions.   When will that happen?   I haven’t seen it yet and I expect it will take a negative catalyst, whatever that may be.

The last time I saw an undersold market like this was in May, June and early July of 2007.  Just like then, stocks can head higher for quite a while in an undersold condition regardless of whether I or anyone else thinks they should be sold.

Enough already with the 1-year anniversary crap.   One year ago since Lehman…One year ago since breaking the buck at the Reserve…One year ago since AIG….One year ago since whatever.   Do you care?   Does it help your investing?   Does remembering last year’s failures make you feel like all the bad stuff is in the past?

We need to start focusing on what is happening now and more importantly, start doing forward-thinking that prevents us from having something else to have a new “1-year ago” pity party by politicians and the media.

The last time I felt so annoyed with the market was in late 2006 and through July of 2007.   I encourage you to read through my archives if you cannot remember.   But here is a sample from February 2007 that sums up a few of my current frustrations.

As I mention in that piece, it’s important to know what your trading biases are and the weaknesses of your style.   Some of my trading challenges from when I wrote that post over 2 years ago are still with me today and the biggest has to do with technical breakouts.   Personally, I don’t feel like it’s possible to permanently remove my weaknesses (with stocks or in life) but instead, I spend a lot of time making sure I am able to identify them when they pop up and stay focused on managing their consequences.

So this week, as I went through the charts I continued with the painful process I began after Labor Day…giving UP signals to stocks that either broke through or were about to pierce big resistance levels.  Many of these signals were only a few weeks old and I hate having to reverse something so quickly, especially when the technical analysis pattern is the one I struggle with the most.  Regardless, it is what you have to do.   Here is a snippet from another 2-year-old post about Exiting At A Loss.

Many investors have big difficulties admitting when they are wrong. I do too. What makes it easier for me is being objective about the prospects for being less wrong going forward. Capitulations occur out of desperation. Exiting a position at a loss is not the same as capitulation if you are focusing on what will happen to the stock next, not what happened to the stock in the past to cause the desperation

Whenever breakout patterns conflict with my personal view of the market’s risk profile, I struggle.   When you couple those factors with the ridiculous fundamental valuations and ignorance of macro economic realities that I believe exist, it’s over the top for me.   However, it is always important to remember that no one gets to decide what is right or wrong about stocks or markets.  They will do whatever they want regardless of your assessment.   So I made about 500 signal changes that I find to be absurd and I look forward to reversing them (very quickly) if and when reality ever sets in again.

Organization of the Gas Exporting Countries.   HMMMM!  Please read this article.

Here’s part of a post I wrote in January of 2007….

It’s almost impossible to argue that lower oil is a bad thing, but I am getting concerned. Clearly, there are divisions with the OPEC oil ministers and most of those disagreements have little to do with oil. Iran, Venezuela and their camp are happy to use oil as a weapon against the United States and the Saudi led group is not so willing to participate. If OPEC keeps losing whatever credibility they still have, I wonder how long it will be before the anti-US members like Venezuela and Iran go on their own. In that case, we could fear one “cartel” and ignore another all at the same time. I know that’s a highly unlikely scenario, but it’s one that pops into my head every once in a while.

At that time and in the years since, I have expected that Venezuela and Iran would join with Russia to create an alternative to the existing OPEC cartel.  So it’s a bit interesting to see Chavez and Putin and their Iranian pals pushing for an increasing influence of their Natural Gas cartel at the same time that OPEC is having its meeting.  I doubt it’s just about natural gas.

Please consider the impacts to energy policies and prices (both oil and natural gas), the US dollar (and dollar side effects in US Treasury demand / rates / gold / inflation) and geopolitical tensions.