$MSFT is pessimistic going into earnings, likely to rise

$MSFT looking positively negative in advance of earnings tomorrow.  That's usually a sign of a post-earnings price rise.  We're good at calling post-earnings selloffs, as we did recently with AA, GOOG, CREE, and RFMD, so we'll see if the excessive pessimism on MSFT plays out to the upside as expected.

See the chart of the plumeting affection for MSFT:

High optimism in $RFMD going into earnings

$RFMD appears on our Top Ten Optimism list going into earnings.  That's usually a bad sign.  Unfortunately the stock is already down 4% today and more than that in the past week, so it's not a clear case of "buy on the rumor."  But we'll see soon enough.

Looks like our $GOOG short idea was right after all - I forgot to mention that in a "Buy on the Rumor" pattern it's often helpful to short at the open after the expected good news.  If the stock rises through mid-day, then time to exit.

Happy Investing!
Richard

Excitement building about $GOOG earnings tomorrow

$GOOG is going parabolic in the past few days on excitement over their upcoming earnings report tomorrow.  That usually spells trouble for the stock price in the short term.  However, $GOOG isn't a straightforward case of over-optimism - occasionally they have big disappointments, and occasionally big wins, so I wouldn't usually call this naivete.  The thing that makes me want to short it before the end of day is the amount of buzz from "noise trader" on online forums and chat rooms.  I'll post some charts of the enthusiastic buzz in a few hours.

$CREE sentiment showed distress among investors before 15% decline

After the earnings disappointment by $CREE after hours, and the fact it had been on our PsychTrades list as a short, I took a look at its Sentiment Alerts (summaries of investor conversations about the stock).  Looks like investors were suspecting fraud and were uncertain before the big disappointment.  See the chart below or at:  http://www.marketpsychadvisor.com/vitalsigns?ticker=CREE:

Trading Sentiment During Earnings Season (e.g., $C too positive)

There are a number of stocks that are overbought, and excessively positive as well, going into earnings season, especially in the banking (see $C down 4% today) and technology sectors.  We'll be reporting on individual ones over the next week, in advance of their reports. 

Our long $GDX call is panning out this morning on a large gap up.  Often buying panic is painful since the bottom can take a few days to form.  In this case (as often happens lately), the bottom occurred overnight.

Given the positivity going into earnings season, this market will likely be a short for a week or so starting later in 1-2 weeks.  But for now, it's still extremely bullish.

Looks like some panic in $GLD at the open, will likely come in today

One important rule of trading, which I forgot yesterday - let the fat pitch come to you.  I mentioned two "low conviction" trades of buying $GDX and shorting $BJK.  Ouch.  Now moving on with a fresh look, $GDX does genuinely look like the herd is all trying to exit at the same time this morning.  A good setup for a short term bounce.  Longer-term, the gold bubble is consolidating, and the herd is moving (has moved) into tech and energy.  Semiconductors ($SMH) and internet ($FDN) are a bit overbought and positive, but likely have move room to run this month on the momentum. 

Shorting $TAN and $AMD and Buying $IEZ and $GSS

We've got some lower conviction trades today (yesterday I didn't post because of low conviction).  It's worth beginning to position for a short on $TAN (solar ETF) based on its overbought situation.  That said, it was oversold last month, and so could still climb up to around $8.40, which is a better place to go short. 

Shorting $AMD on the underreaction to CEO shake-up.  That's big news, and creates fundamental uncertainty.  Coming off the spike related to CES, it still has a ways to slide (1-2%) over the week.

Buying $GSS on oversold situation, but again, low conviction.  Also buying $IEZ oil services due to a reversion to trend from an oversold state (more particularly, very negative sentiment).