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The technicians spent the year watching to see which direction the ?Japanese Trade? would resolve itself toward after a blow off top in the spring followed by six months of consolidation.

For the uninitiated, the Japanese Trade is short Yen, long Nikkei, based on the alignment of the Japanese political establishment and the BoJ in the urgent need for cyclical growth.

It looks like this week we may have gotten the answer as to how that consolidation is resolving ? and it?s to the upside. Full disclosure, we?ve been long this trade all year and have added to it in Q3.

Much virtual ink has been spilled on how difficult it is for individual, and even professional, investors to generate alpha in the capital markets. Ray Dalio of Bridgewater Associates the largest hedge fund operator in the world said as much this week at the Dealbook conference:

?I think the most important thing for an investor is to create a proper balance of those investments,? he said. ?In other words, I think that going forward, most investors are not going to be able to produce alpha,? a measure of outperformance.

$142 million for a Francis Bacon triptych. $120 million for a pastel by Edvard Munch. $106 million for an oil painting by Picasso.

After a slow 2012, the fine-art market is back. Stock market gains worldwide and growing wealth in Asia have lifted prices to new all-time highs. That includes the recent $142 million for the Francis Bacon triptych, eclipsing last year's record $120 million for Munch's "The Scream."

The fine-art market is trading just like the stock market. Buyers are stepping out and lifting the bid. That's putting a lot of cash into the pockets of investors with rare collections.

But art connoisseurs aren't the only ones cashing in. I want to tell you about a global leader in the auctioneer business that is also cashing in on these nine-figure masterpieces.

Not only does the company generate big commissions from conducting auctions for the world's rarest art and wealthiest individuals, it enjoys a duopoly with just one competitor, is protected by high barriers to entrance, is highly leveraged against growth in Asia and also pays a quarterly dividend.

That has fueled an outsize gain of 80% in the past two years. Take a look below.

Random Thoughts


The Ps had a decent day, taking on nearly ?%. This action has them continuing to breakout out of their high level consolidation/Double Top Knockous-ish Pattern. And, this action keeps them at all-time highs.

The Quack didn't set the world on fire but it did manage to close in the plus column, continuing its rally out of the recent Double Top Knockout Pattern. This was enough to keep it at multi-year highs.

As I preach, you can only predict the short-term when it comes to the markets with any degree of accuracy. The Ps and Quack have triggered a buy signal and have so far followed through. So far, so good but as usual, continue to take things one day a time.

I'm not complaining but it was a mostly a big cap affair. The Rusty ended flat on the day.

With the Ps and Quack at new highs, overall, the day scores as a positive.

It is no surprise that many sectors like Ps and Quack managed to close at new highs. Some of these include Brokerages, Insurance, Defense, Health Services, Manufacturing, Retail, Chemicals, Transports, Conglomerates, and Consumer Non-Durables.

Even some areas such as Drugs which have recently rolled over have turned back up and are now making new highs.

Every day that the market makes new highs is a day when you shouldn't fight it. What is, is. As long as it continues to do this, go with the flow.

So what do we do? Nothing has changed: I'm still seeing a few shorts setting up. No worries though. This is perfectly normal since the rising tide is lifting all boats (i.e. weaker stocks are pulling back). Again, with the market at new highs you certainly do not want to fight it. Since there aren't a lot of meaningful longs, now would be a good time to trail stops and look to take partial profits in any existing longs in your portfolio as the initial profit targets are hit. If this thing turns into the real deal, then you'll still have a partial position and participate. And, if it don't, then you scratch out of the remainder of the position for a better-than-a-poke-in-the-eye trade. Honor your stops on any leftover shorts. This money and position management plan-stops, trailing stops, taking partial profits-will keep you in the game a long time. It creates a portfolio ebb and flow. This helps to keep you on the right side of the market during trends and mostly out of the ma rket during choppy conditions.

Click here to watch today's Market in a Minute.

Best of luck with your trading today!

Dave
omgmachines.com/ericx
__________

Expert swing trader Dave Landry comments on the charts for the major markets, indexes and sectors for the upcoming trading day in his daily one-minute video.

Make sure your sound is turned up. A new browser window will open and the video will begin playing within a few second

In a fairly rapid time, the solar power industry has been able to tackle two major challenges that threatened to decimate the industry.

First, far much too capacity led to rapidly falling prices, which pushed the industry's weakest players into bankruptcy and has left a few more of them struggling to stay afloat. Restrained capacity growth has become the theme of 2013, enabling demand to catch up, and prices on solar panels are no longer plunging at a rapid clip.

Second, the steep fall in solar panel prices has pushed this technology a lot closer to "grid parity," compared to fossil fuels. If natural gas prices had not also plunged as well in recent years, demand for solar would really be booming.

But gas prices have fallen, and it's unlikely they will spike higher in coming years. Gas drillers will simply boost output any time prices rise, which is OK with an industry that has learned to become profitable with natural gas at $3.50 to $4 per thousand cubic feet (Mcf). Even as gas rallied to $5 per Mcf, solar still couldn't compete, at least not without government tax credits (that are set to expire in the U.S. in 2016, have been sharply rolled back in Europe and remain firmly in place in China).

Meanwhile, the improving backdrop for solar has kicked off a furious rally, led in part by short sellers who are getting trampled. The average move up from the 52-week low exceeds 500% for this group.

When chip equipment maker Applied Materials (Nasdaq: AMAT) surpassed $10 billion in annual revenue for the first time in fiscal 2011, its competitors could only sigh. The company's industry leadership was never in doubt, but a series of acquisitions gave it such a broad suite of offerings that rivals wondered if they could ever take market share again.

Applied Materials' massive market presence eventually led its two biggest rivals, Lam Research (Nasdaq: LRCX) and Novellus Systems to join forces in 2011, but even that combined entity has yet to crack the $5 billion annual revenue barrier.

KLA-Tencor (Nasdaq: KLAC) is also in Applied Materials' rearview mirror, with only $3 billion in annual sales. And a handful of smaller companies bring up the rear, none of which have even $1 billion in annual revenue. (Note: Only U.S. companies have been considered here.)

Today, many followers of the Mad Hedge Fund Trader?s Trade Alert service have up to eight November option spreads expiring at their maximum potential profit.

My strategy of taking advantage of the short November expiration calendar and betting that the markets stay in narrow ranges turned out to be wildly successful. At this stage I am batting eight for eight. If these all work, then I will have issued 15 consecutive profitable Trade Alerts since October, something most hedge fund managers would die for at this time of the year.

I have already taken profits on five of my November positions, but judging from the email traffic, many of you are hanging on to the bitter end and have asked me how to handle these.

It?s really easy. You don?t have to do anything. Nada, Squat.

Trading in the underlying ceases today, Friday, November 15 at 4:00 PM EST. The contracts legally expire on Saturday night, November 16. The cash profit is then credited to your account on Monday, November 18, the margin freed up, and the position disappears into thin air.
Only the (SPY) November 2013 $180-$183 bear put spread is giving us a run for our money. As I write this, the (SPY) is trading at$179.27, and we are a mere 73 cents in the money on the $180 puts that we are short.

If the (SPY) closes on Friday over $180, then you will be short 100 shares for every contract of the November $180 puts that you are short. Your long position in the November, $183 puts expired on Friday, so you will be naked short. This is not a position you want to have.

It is always best to cover this at the opening on Monday morning to limit your losses and keep your risk from running away. You may also not have sufficient margin to run a naked short, so If you don?t liquidate, your broker will, probably at a worse price.

Don?t try to trade a leveraged short (SPY) position in a bull market. It?s probably beyond your pay grade, and I doubt you?ll sleep at night.

I?m betting that the (SPY) will close on Friday below $180, so I am hanging on to my position. With only one single day to expiration, it is a coin toss what will happen. But with the markets this sluggish, if I am wrong, it will only be by pennies. Quite honestly, being up 56% on the year I don?t mind taking a gamble here.

I know all of this sounds very complicated to the beginners among you. Don?t worry, this all becomes second nature after you?ve done the first few thousand of these.

If you have any doubts, call your broker and they will tell you what to do, especially the part about you needing to do a thousand more trades. Here, an ounce of prevention is worth a pound of cure. Then it?s on to the next trade.

In the meantime, take your winnings and plan your winter Caribbean holiday with your significant other. Or plan a ski vacation at Incline Village in Nevada. They?ve already had two nice dumps of snow. If you do, drop me a line and I?ll take you out for coffee at Starbucks.
Well done, traders!

?A strong recovery will ultimately enable the Fed to reduce its monetary accommodation and reliance on unconventional policy tools such as asset purchases,? said my friend, Federal Reserve governor nominee, Janet Yellen.

The Chart of the Day is Canadian Solar (CSIQ). I sorted the New High List for Weighted Alpha and this stock has a WA of 1,376.33+ and is up 1,534.87% in the last year. It was the COD on 9/25 and since the Trend Spotter gave a buy signal on 9/5 the stock is up 226.74%.

It is a solar module producer. The Company offers ingots, wafers, solar cells, solar modules and other solar applications for on-grid and off-grid use to customers worldwide. It also designs and produces specialty solar modules and products such as solar-powered bus stop lighting; and specialty products, such as portable solar home systems and solar-powered car battery chargers.

Any time a company exceeds or lags quarterly profit forecasts by a big margin, the resulting share price action is quite predictable. Indeed, the list of stocks making recent 52-week highs are dominated by companies that posted stellar third-quarter results.

But the market action doesn't always play out that way. On occasion, a company will handily surpass consensus profit forecasts, analysts will boost their outlook for the next year, and yet the stock price falls in value.

How do you explain such a disconnect?

Perhaps some investors were looking for even greater upside than the company delivered. Or perhaps investors have begun rotating out of the company's industry, selling off all stocks in the group on an indiscriminate basis. Whatever the reason, a combination of surging profits and falling share prices is a nearly perfect setup.

I reviewed several hundred stocks that topped third-quarter profit estimates by at least 20%. Predictably, the vast majority surged higher in response. But I was able to come across three dozen companies that fit the backdrop of "good earnings/bad share response." From there, I tossed out any stocks in which analysts lowered their 2014 profit forecasts after the quarterly conference call. If a company blew past third-quarter estimates but expressed caution about the year ahead, then the earnings surprise isn't really notable.

We're left with 11 stocks, all of which exceeded third-quarter EPS (earnings per share) forecasts by at least 20%, all of which now have 2014 consensus profit forecasts that are higher than when earnings season began, and all of which have actually fallen in value since earnings were released.

Can you imagine?!

What will the investment world do if those darn indexes keep climbing despite the crazy overvaluation and the record-breaking bullish sentiment and blockbuster IPO and secondary stock issuance levels and the ever-expanding earnings multiples?

What will happen?

Will they just stand idly by and watch the abomination unfold without doing anything? Will they not stand up and shout from the rooftops that all has gone awry, and the dangers of a steep decline ? even a wholesale crash ? are everpresent? Will not duty as patriots and just old fashioned common sense force their hands ? and cause them slap the sell button not once but twice, and then again as they open their shorts? For surely the dreaded thing is so monstrously overbought that every honest man is bound by King and country to force a correction.

No?

I grew up in and still live in the South. During the dog days of summer in July and August, when folks say, "It's not the heat, it's the humidity," believe me, it's the heat AND the humidity.

Everything wilts. People move more slowly. Business slows down a little, too. There's a real and noticeable effect.

The fixed-income markets -- represented by Treasurys, corporate and municipal bonds, and other income-oriented investments -- experienced the dog days firsthand this summer as investors fretted over the prospect of the Federal Reserve scaling back its bond purchases, also known as tapering. Look what happened to the 10-year Treasury:

Markets were heading slightly lower on Wednesday morning as investors fears continued over how soon the Fed could start pulling back on their bond-buying program. The comments from two Federal Reserve officials yesterday did not ease worries. Both Minneapolis Fed Bank President Narayana Kocherlakota and Atlanta Fed President Dennis Lockart, said that the monetary policy should remain ?accommodative.? Today the Fed Chairman, Ben Bernanke, is expected to speak at 7:00 p.m. Investors will hone in on possible clues as to when they might have their sights set on cutting back on the program. Some even think that the Fed could begin tightening the reigns as early as December after a stellar October jobs report was recently announced. Rick Meckler, president of investment firm LibertyView Capital Management, said, ?We are bouncing back and forth here because the market is divided on higher rates and the benefits of a strong economy. Investors have not made up their mind on which is more of a driving force for the market.?

PetroChina has landed a deal to purchase Petrobras for $2.6 billion. PetroChina is the top oil and gas firm in China, while Petrobras is an oil and gas assets company based out of Peru. The deal was signed today but still needs approval from both the Chinese and Peruvian governments. Petrobras currently pumps out an estimated 800,000 tons of oil per year. PetroChina said, ?The three target blocks are all quality oil properties in Peru with achievable profit potential. The acquisition of the assets will help to expand the scale of PetroChina?s oil and gas cooperation in Latin America, and drive the sustainable development of PetroChina?s overseas business.?

Shares of Macy?s (M) were headed higher after the company surpassed analysts expectations with strong sales. They attributed their strong sales partially to their stronger advertising efforts. The company?s third-quarter earnings rang in at $177 million, or 47 cents per share. This beat out last years $145 million, or 36 cents per share a year ago. Revenue was up to $6.28 billion, or 3% higher. Analysts were expecting revenue to come in at $6.19 billion. At Macy?s (M) stores open at least a year there was a 3.5% increase, also beating out analysts projections of a 2.1% gain. The company said that they showed strong sales in October which has made them more stable heading into the holiday season. The holiday shopping season can account for nearly 40% of companies annual revenue. They are taking steps to set themselves up for success as being one of the first retailers to announce their plans to stay open on Thanksgiving. Brian Yarbrough, an analyst with Edward Jones, said, ?They?re in good shape. Unless something changes abruptly in consumer sentiment, they should have a great holiday season.?

That?s all for the day.

Imagine pocketing checks from an investment throwing off 7% interest.

It's not easy to picture in today's low-interest environment with saving accounts paying less than 1% and the S&P 500 carrying a dividend yield just under 2%.
Now, imagine pocketing dividends from a company yielding 7% with rock-solid business income all but backed by, and coming directly from, the federal government.

Hard to believe, but an investment like this exists. Around the time that I first told High-Yield Investing readers about the company last month, one person was so excited about it, he was inspired to email me this question:

"I was recently reading about Government Properties Income Trust (NYSE: GOV). With monthly income plus special tax preference, it seems almost like a no-lose stock. Is it too good to ignore?"
-- David K.

I wouldn't call it a "no-lose" proposition, but GOV is definitely worthy of consideration.

As the name implies, Government Properties Income Trust owns buildings that are leased to state and federal government agencies. The company owns 82 properties from New York to California that hold more than 10 million square feet of rentable space. Virtually all (94%) of the income generated by these buildings comes from the U.S. government, 10 state governments, and the United Nations.

Just to be clear, GOV itself is not a government agency, nor are its dividends implicitly backed by the government. This is just an ordinary company that has some rather extraordinary tenants: the Social Security Administration, the FBI, the Department of Energy, the Food and Drug Administration and the Department of the Interior.

All of these agencies (and a few dozen more) rent space from Government Properties Trust. Even the Internal Revenue Service pays rent to GOV. So if you're tired of sending money to the IRS, this is one way to turn the tables and have them write checks to you.

As I've said before, there are some perks to being Uncle Sam's landlord. Compared with typical retail and office tenants, government agencies are more stable (less chance of default) and tend to stick around longer (more likely to renew leases). On average, they remain in the same spot for 26 years, dutifully sending in rent checks every month.

Now, that doesn't mean that the company is immune to trouble. For example, defense cutbacks have taken a toll in Washington, D.C., where occupied office space has dropped by more than 1.5 million square feet. That's the biggest decline among the nation's metro markets.

Still, GOV is in fine financial shape, with an investment-grade balance sheet and manageable debt (3.5 times annual EBITDA (earnings before interest, taxes, depreciation and amortization)). And the firm's portfolio is 93.4% occupied, with an average remaining lease term of 5.4 years. Those properties are throwing off enough income to support a nice 7.1% dividend yield.

Funds from operations have been running about 125% of dividends, which means the company is comfortably generating $1.25 in cash for every dollar distributed to stockholders. That's a nice margin of safety.

All in all, this 7% dividend payout is well supported by a stable income stream. And 13 new properties acquired last year are earning even more (about 8.2%). I want to see how the ongoing budget situation plays out in

It?s a year since I explained my reckless, intentionally dumb 3D printer trade. As I explained back in November of 2012:

I own both of the 3-D printer stocks in my personal account in small enough amounts that they can?t hurt me but large enough amounts that, if I?m right, their rise will be meaningful.

My completely unscientific plan has been to ignore valuation and avoid any news about them, only looking at them bi-weekly to see where they?re trading. So far I?m up quite a bit. It could all be wiped away in a week or I could double my money again?either way, I?m staying hands-off with my Triple D ($DDD) and my Stratasys ($SSYS) positions and willfully remaining ignorant about the short-term. I?m doing this on purpose.

Because I believe the big opportunity is too great for me to allow inconsequential tidbits of news and data to shake me out. Screw the news, forget the fundamentals?if this thing turns out to really be a thing, all I know is I?m going to want to own the two pure-plays down the road.

I did exactly what I said I would, thankfully. I tuned out every genius trader who was ?fading strength? or ?managing risk? or ?noting key levels? because I truly don?t feel they know what the f*ck they?re talking about when a brand new industry sprouts up out of nowhere. I deliberately ignored almost every headline, TV discussion, research report, analyst rec, etc. And I especially ignored people focusing on minute-by-minute price ticks.

Here were the results (quoted in percentage gain on the right axis), $SSYS in white, $DDD in purple, the S&P Midcap 400 Index in green since that post.

Quote of the day

Brad Balter, ?(T)here are thousands of long-short equity hedge funds out there already?who needs another?? (NetNet)

Chart of the day

In this market, finding a stock with strong upside that also happens to have come down well off of its 52-week high isn't as easy as it may seem.

But thanks to what I call the performance protection trade, there are high-fliers that have pulled back. Stocks such as Tesla Motors (Nasdaq: TSLA) and Facebook (Nasdaq: FB) fit this description well, as does auto and equipment rental giant Hertz Global Holdings (NYSE: HTZ).

HTZ has rewarded shareholders with a 40% gain in 2013, easily besting the benchmark S&P 500 Index's 24% year-to-date showing.

However, at the time of its 52-week high of $27.75 in mid-July, HTZ was up more than 70%. Shares sold off through the rest of the summer before retesting that high in September.

Then, in late September, HTZ suffered a huge one-day sell-off that drove it below both the 50-day and 200-day moving averages. HTZ currently trades near $22.80, about 17% off its recent highs and right about where it traded in mid-April.

?I?ve been doing fifty million a year in commission business with your desk, and believe me, it?s not because I care what your chief strategist?s research reports say. You?re not allowed to give me ?color? on the trading activity of others anymore because your line?s recorded. You?re also not able to create products that will fail for me to be able to short. And I sure as hell don?t need your firm?s Barclays Center tickets, I?m a Knicks fan and I have a box at the Garden. The least you can do is get me a million shares of the LinkedIn IPO.?

One of the key sources of alpha for famous hedge fund managers operating in the late 1990′s was the IPO flip. They won?t admit it now when citing their ?compound returns? from that era, but everyone in the game knows it. And then the strategy kind of went to sleep as IPOs cooled off and the markets stopped guaranteeing mammoth first-day pops.

But over the past year or so it?s been Game On again. As explained in the below linked-to article at ValueWalk, this is a perfect environment for it. The public is once again hungry for deal stocks and will bid up shit like Potbelly and the Container Store by 100% upon the open, it?s almost a lock. In the meantime, companies ? specifically tech startups ? have been holding off on their IPOs to the extent possible, giving capital rich hedge funds an even better opportunity than IPO share ? they?re actually buying in at earlier stages while the company is still private. This makes the profit on the flip even juicier.

Profits are profits and no one is saying these gains require an asterisk next to them. But be aware that this source of alpha is likely finite and fleeting.

In the world of identity theft, it doesn't pay to assume "it won't happen to me."

In fact, with an average of a new victim every three seconds in 2012 -- and the rate of breaches seeming to increase at a faster pace than the national debt -- you might as well assume that it will happen to you and be prepared when it does.

Identity theft can dig you a debt ditch deeper than the Mariana Trench. But I've found a $1.4 billion company -- a mere pollywog among the multi-billion-dollar big fish in this sector -- that's throwing out lifelines to consumers and dishing out profits to investors.

In fact, this little gem just reported record revenues and hundreds of thousands of new customers in the third quarter. Its IPO went for $9 just over a year ago, and newcomers to the stock are basking in 75% gains.

We'll take a closer look at the company in a moment, but first, let's talk about what drives this crime today, how big the business of identity theft has become, and what is being done to protect people like you and me.

A $21 Million Violation Of Privacy
Unfortunately, the same technologies that make banking, shopping and working so convenient also make identity theft easier. An estimated 12.6 million people were victimized last year, at a cost of $21 billion. At a projected annual growth rate of 4%, the losses are on pace to grow even more staggering.

Stolen Social Security numbers caused the most damage because they're almost always required to open new accounts, but credit card fraud accounts for more than 65% of all cases.

The ways in which thieves steal information has become sophisticated: They can read "noise" waves and intercept data with ATM skimmers, or infiltrate peer-to-peer networks like music sites. Other ways include phishing (by email), "SMSishing" (by text) or "Vishing" (by voicemail).

It's not all rocket science, though. Many old-school ways still work: Dumpster diving, wallet stealing, snail mail swiping, looking over someone's shoulder at a device, giving credit card numbers to customer service reps or inputting any data online.

Unfortunately, thefts are adept at cracking codes, creating viruses and weaseling their way into improperly secured networks at work, school, banks -- really, any place that involves a computer.

People can only go so far to protect themselves, and, unfortunately even the most savvy IT professional in the world isn't capable of building an impenetrable fortress.

Unlocking The Door To Profits

In the world of identity theft, it doesn't pay to assume "it won't happen to me."

In fact, with an average of a new victim every three seconds in 2012 -- and the rate of breaches seeming to increase at a faster pace than the national debt -- you might as well assume that it will happen to you and be prepared when it does.

Identity theft can dig you a debt ditch deeper than the Mariana Trench. But I've found a $1.4 billion company -- a mere pollywog among the multi-billion-dollar big fish in this sector -- that's throwing out lifelines to consumers and dishing out profits to investors.

In fact, this little gem just reported record revenues and hundreds of thousands of new customers in the third quarter. Its IPO went for $9 just over a year ago, and newcomers to the stock are basking in 75% gains.

We'll take a closer look at the company in a moment, but first, let's talk about what drives this crime today, how big the business of identity theft has become, and what is being done to protect people like you and me.

A $21 Million Violation Of Privacy
Unfortunately, the same technologies that make banking, shopping and working so convenient also make identity theft easier. An estimated 12.6 million people were victimized last year, at a cost of $21 billion. At a projected annual growth rate of 4%, the losses are on pace to grow even more staggering.

Stolen Social Security numbers caused the most damage because they're almost always required to open new accounts, but credit card fraud accounts for more than 65% of all cases.

The ways in which thieves steal information has become sophisticated: They can read "noise" waves and intercept data with ATM skimmers, or infiltrate peer-to-peer networks like music sites. Other ways include phishing (by email), "SMSishing" (by text) or "Vishing" (by voicemail).

It's not all rocket science, though. Many old-school ways still work: Dumpster diving, wallet stealing, snail mail swiping, looking over someone's shoulder at a device, giving credit card numbers to customer service reps or inputting any data online.

Unfortunately, thefts are adept at cracking codes, creating viruses and weaseling their way into improperly secured networks at work, school, banks -- really, any place that involves a computer.

People can only go so far to protect themselves, and, unfortunately even the most savvy IT professional in the world isn't capable of building an impenetrable fortress.

Unlocking The Door To Profits
Because identity theft has become so prevalent and such a b

Janet Yellen speaks before the Senate Banking Committee this morning at 10am. She?s released her brief address beforehand and will probably be answering a wealth of questions, especially on the idea of the taper.

Here?s BofA Merrill?s US Economics team with a preview on that score:

The taper question, ultimately
Yellen states that ?supporting the recovery today is the surest path to a more normal
approach to monetary policy? ? in other words, policy needs to remain easy now to
tighten later. Additionally, ?a strong recovery will ultimately enable the Fed to reduce
its monetary accommodation and reliance on unconventional policy tools such as
asset purchases.? Early commentary focused on the word ?ultimately? as a possible
signal that Yellen does not plan to taper for a while. But ?reduce its monetary
accommodation? typically has meant rate hikes in official Fed communication, while
reducing ?reliance on unconventional tools? likely refers to the eventual reduction in
the size of the Fed?s balance sheet rather than tapering. Recall, most Fed officials
take a ?stock approach? to QE; in that view it?s the total amount of assets owned and
not the purchase pace that defines the degree of accommodation. No doubt she?ll
get questions about the Fed?s tapering plans on Thursday.

Expect market participants to be hanging on her every word?

Janet Yellen speaks before the Senate Banking Committee this morning at 10am. She?s released her brief address beforehand and will probably be answering a wealth of questions, especially on the idea of the taper.

Here?s BofA Merrill?s US Economics team with a preview on that score:

The taper question, ultimately
Yellen states that ?supporting the recovery today is the surest path to a more normal
approach to monetary policy? ? in other words, policy needs to remain easy now to
tighten later. Additionally, ?a strong recovery will ultimately enable the Fed to reduce
its monetary accommodation and reliance on unconventional policy tools such as
asset purchases.? Early commentary focused on the word ?ultimately? as a possible
signal that Yellen does not plan to taper for a while. But ?reduce its monetary
accommodation? typically has meant rate hikes in official Fed communication, while
reducing ?reliance on unconventional tools? likely refers to the eventual reduction in
the size of the Fed?s balance sheet rather than tapering. Recall, most Fed officials
take a ?stock approach? to QE; in that view it?s the total amount of assets owned and
not the purchase pace that defines the degree of accommodation. No doubt she?ll
get questions about the Fed?s tapering plans on Thursday.

Expect market participants to be hanging on her every word?

Fine, sorry. Here:

Random Thoughts


As I often preach, when I market is hovering near new highs you have to be careful not to chase your own tail. Near the top of the range it will look like the market is poised to explode and near the bottom of the range it will look like the market is ready to implode.

You can't anticipate the move too much. Otherwise, you'll end up over weighted on one side, and, as Murphy would have it, it'll be the wrong side.

Speaking of ranges, up until yesterday, the Ps and Quack have mostly been stuck in the short-term range. That changed on Wednesday. Both indices broke out nicely to new highs. Although breakouts are prone to failure and you shouldn't trade them blindly, the fact that this breakout came from a Double Top Knockout buy signals (especially in the Nasdaq) suggests that it might just have legs.

Internally the market was strong on Wednesday. A lot of areas, too many to mention, banged out new highs-I suppose this isn't a shocker with the Ps at all-time highs and the Quack at multi-year highs. Some weaker areas that looked questionable snapped back. Again, it was strong throughout. In market speak, the market had good breadth.

Is this the "all clear?" Well, in this business you never know for sure-if you did, you'd own the world. It does look like the indices are off to a good new start, especially since they are coming off the Knockout buy signal.

So, do we rush out and buy? Well, not exactly. I'm still not seeing a lot of meaningful buy setups at this juncture. This is perfectly normal. The methodology requires a pullback so until the market pulls back-and ideally, continues its rally first---we likely won't see a lot of new potential positions.

So, what do we do? I'm seeing a few shorts setting up. No worries though. This is perfectly normal since the rising tide is lifting all boats (i.e. weaker stocks are pulling back). With the market at new highs---especially with yesterday's vigor-you certainly do not want to fight it. Since there aren't a lot of meaningful longs, now would be a good time to trail stops and look to take partial profits in any existing longs in your portfolio as the initial profit targets are hit. If this thing turns into the real deal, then you'll still have a partial position and participate. And, if it don't, then you scratch out of the remainder of the position for a better-than-a-poke-in-the-eye trade. Honor your stops on any leftover shorts. This money and position management plan-stops, trailing stops, taking partial profits-will keep you in the game a long time. It creates and portfolio ebb and flow. This helps to keep you on the right side of the market during trends and mostly out of t he market during choppy conditions.

OH, BTW, how beautiful was Wednesday's OGRE? You're welcome! Come to the chart show today, I'll walk you through it. Trust me though, they don't always work out in such a textbook fashion. Ahhh, but when they do......

Click here to watch today's Market in a Minute.

Best of luck with your trading today!

Dave
omgmachines.com/ericx
__________

Expert swing trader Dave Landry comments on the charts for the major markets, indexes and sectors for the upcoming trading day in his daily one-minute video.

Make sure your sound is turned up. A new browser window will open and the video will begin playing within a few seconds.

Random Thoughts


As I often preach, when I market is hovering near new highs you have to be careful not to chase your own tail. Near the top of the range it will look like the market is poised to explode and near the bottom of the range it will look like the market is ready to implode.

You can't anticipate the move too much. Otherwise, you'll end up over weighted on one side, and, as Murphy would have it, it'll be the wrong side.

Speaking of ranges, up until yesterday, the Ps and Quack have mostly been stuck in the short-term range. That changed on Wednesday. Both indices broke out nicely to new highs. Although breakouts are prone to failure and you shouldn't trade them blindly, the fact that this breakout came from a Double Top Knockout buy signals (especially in the Nasdaq) suggests that it might just have legs.

Internally the market was strong on Wednesday. A lot of areas, too many to mention, banged out new highs-I suppose this isn't a shocker with the Ps at all-time highs and the Quack at multi-year highs. Some weaker areas that looked questionable snapped back. Again, it was strong throughout. In market speak, the market had good breadth.

Is this the "all clear?" Well, in this business you never know for sure-if you did, you'd own the world. It does look like the indices are off to a good new start, especially since they are coming off the Knockout buy signal.

So, do we rush out and buy? Well, not exactly. I'm still not seeing a lot of meaningful buy setups at this juncture. This is perfectly normal. The methodology requires a pullback so until the market pulls back-and ideally, continues its rally first---we likely won't see a lot of new potential positions.

So, what do we do? I'm seeing a few shorts setting up. No worries though. This is perfectly normal since the rising tide is lifting all boats (i.e. weaker stocks are pulling back). With the market at new highs---especially with yesterday's vigor-you certainly do not want to fight it. Since there aren't a lot of meaningful longs, now would be a good time to trail stops and look to take partial profits in any existing longs in your portfolio as the initial profit targets are hit. If this thing turns into the real deal, then you'll still have a partial position and participate. And, if it don't, then you scratch out of the remainder of the position for a better-than-a-poke-in-the-eye trade. Honor your stops on any leftover shorts. This money and position management plan-stops, trailing stops, taking partial profits-will keep you in the game a long time. It creates and portfolio ebb and flow. This helps to keep you on the right side of the market during trends and mostly out of t he market during choppy conditions.

OH, BTW, how beautiful was Wednesday's OGRE? You're welcome! Come to the chart show today, I'll walk you through it. Trust me though, they don't always work out in such a textbook fashion. Ahhh, but when they do......

Click here to watch today's Market in a Minute.

Stuff I?m Reading this Morning?

Highest conviction hedge fund exposure by asset class. (ZeroHedge)

Jobless Claims drop for fifth straight week. (USAToday)

Someone gave JPMorgan the idea that America was interested in social engagement with it. What a solipsistic bubble bubble of ignorance these people have constructed for themselves to live in. (Bloomberg) and (BusinessInsider)

Five stocks ready to break out from multi-year bases. (bclund)

Jeff Gundlach says stocks are the only game in town?for now. (Reuters)

Tyler Cowen: The robots are already here and taking our jobs. Become a libertarian. (Politico)

Ari Weinberg on creating a personal investment benchmark. (BBC)

This is not a story from an alternate universe or different dimension: SnapChat, with a dozen employees, is supposedly worth $3 billion according to internet math. (NYT)

?While quantitative value strategies focusing on both value and profitability metrics have added significant value to portfolios, they cannot identify which individual stocks you should buy.? (CBSMoneyWatch)

The yuppies and old hipsters are getting stoned in public all day with vaporizers. (NYP)

REMINDER: Backstage Wall Street is now on Kindle!

The Chart of the Day is Daqo New Energy (DQ). I found the stock by sorting the New High List for Weighted Alpha and this stock has a WA of 481.60+. Since the Trend Spotter signaled a buy back on 8/23 this stock has shot up 456.78%!

It is engaged in the manufacture and sale of high-quality polysilicon to photovoltaic product manufacturers. The polysilicon is further processed into ingots, wafers, cells and modules for solar power solutions.

Home furnishings retailer Restoration Hardware Holdings (NYSE: RH) hasn't been publicly traded for long, but so far, the company has made the most of it. Since it went public on Nov. 2, 2012, the stock has rallied more than 200%.

For its initial public offering, the company sold 5.2 million shares at $24 apiece, which valued the deal at about $124 million.

Leading up to its IPO, the company saw double-digit revenue growth for 10 consecutive quarters, and over the past 12 months, top-line growth has continued. Many analysts have adjusted their price targets higher. Jefferies, for example, raised its price target from $68 to $88 in September. The company's next earnings announcement is scheduled for mid-December.

The fact that a company selling high-end home furnishings can flourish in a slowly recovering economy is a good sign not only for Restoration Hardware, but also for the housing market.

While certainly not sporting as spectacular gains as RH, other home furnishings retailers have also rallied. Bed Bath & Beyond (Nasdaq: BBBY) and Williams-Sonoma (NYSE: WSM) have seen their share prices rise about 25% to 30% in the past year, reflecting improvements in the housing market.

Restoration Hardware caught the attention of Steve Cohen, Paul Tudor Jones and other hedge fund billionaires. Having big-money guys like these supporting the stock is another positive, but traders will need to watch the company's filings with the Securities and Exchange Commission closely for changes in ownerships.

On the charts, RH looks great from a technical perspective. On the weekly chart looking back to its IPO, the breakout in May is at the core of my bullish take on the stock.

I spent a weekend attending a graduation in Washington State, a stone?s throw from where the 2010 Vancouver Winter Olympics were held. While sitting through the tedious reading of 550 names, I was struck by how many seemed to come from abroad.

As I listened to the wailing ceremonial bagpipes, I did several calculations on the back of the commencement program and was shocked with what I discovered.

Higher education has grown into a gigantic industry for America, with a massively positive impact on our balance of payments, generating an impact on the world far beyond the dollar amounts involved.

According to the non-profit Institute of International Education, there are 819,644 foreign students in the US today, up an impressive 7.2% from last year. This combined student body pays an average out-of-state tuition of $25,000 a year each totaling some $24 billion. The positive impact on the US balance of payments is huge.

China is far and away the dominant origin of these students, accounting for 235,597, up 26% from the previous year. South Korea and India take the number two and three slots, thanks to the generous scholarships provided by their home governments. Saudi Arabia and Brazil are showing the fastest growth rates.

A fortunate few, backed by endowed chairs and buildings financed by wealthy and eager parents, land places at prestigious universities like Harvard, Princeton, and Yale. The top destinations of foreign students are the University of Southern California in Los Angeles, CA, the University of Illinois at Urbana-Champaign, Indiana?s Perdue University, and New York University, with each of these claiming 9,000 foreign students.

However, the overwhelming majority enroll in the provinces in a thousand rural state universities and junior colleges that most of us have never heard of. Many of these schools now have diligent admissions officers scouring the Chinese hinterlands looking for new applicants.

The financial windfall has enabled once sleepy little schools to build themselves into world-class institutions of higher learning, with 30,000 or more students. They boast state of the art facilities, much to the joy of local residents and state education officials. Furthermore, the overwhelming leadership of education industry is steadily Americanizing the global establishment.

I can?t tell you how many times over the decades I have run into the Persian Gulf sovereign fund manager who went to Florida State, the Asian CEO who attended Cal State Hayward, or the African finance minister who fondly recalled rooting for the Kansas State Wildcats.

You know the recently ousted president of Egypt, Mohamed Morsi? He was a former classmate of mine at USC. Go Trojans!

Those who constantly bemoan the impending fall of the Great American Empire can take heart by merely looking inland at these impressive degree factories. These students are not clamoring to get into universities in Beijing, Moscow, or Tokyo.

?When a manager with a reputation for brilliance takes a business with poor fundamental economics, it is the reputation of the business that remains intact,? said oracle of Omaha, Warrant Buffett.

It goes without saying that the stock market is an extremely competitive arena. Money management firms spend millions to find profitable niches, strategies and tactics.

Where short-term trading is concerned, the advent of high-frequency trading has made speed more important than ever. This niche has become so competitive that some firms have relocated their operations to their stock exchange's facilities to get their orders to the exchange before the competition's.

Fortunately, long-term investors don't have to concern themselves with the arms race in high-frequency trading. While large firms fight it out for microsecond advantages, long-term investors can exploit time-tested niches. One such niche outperformed the S&P 500 Index by an average of 13% from January 1995 to July 2012, including a period of 45% outperformance between 2000 and 2005.

However, the success of this strategy hasn't captured investors' interest. One reason, to be frank, is that it's a little boring in comparison to other investing strategies. Another is that after the catalyst for this strategy occurs, shares often trade lower for the first month or so. A third is that this strategy was decimated during the 2008 financial crisis. These factors appear to work in unison to spook many investors despite the high returns.

This strategy is known as spin-off investing. It entails buying shares in a company that has been spun off from a larger parent firm. A parent company may have many reasons for spinning off a subsidiary, but typically, the primary goal is to increase shareholder value by jettisoning debt and slashing expenses.

Yet shareholders of the original company often dump their granted shares of the new, smaller company. This is shareholders in the parent company often have no interest in owning the spun-off company, so they sell their shares, sending the spin-off's stock lower -- at least initially. However, other investors often recognize the value in the spin-off's lower price, sending shares on an upswing.

Spin-offs are often successful, and one main reason is that the spin-off's executives are frequently given greater incentives -- in the form of stock options in the new company -- to succeed than they may have had at the parent firm. Think of a spin-off as a startup -- but one with a seasoned executive staff, an existing business model and customer base, and direct experience in the field.

You can search for pending spin-off companies on the Securities and Exchange Commission website and by keeping up with the financial news. Several of the most successful spin-offs include Hillshire Brands (NYSE: HSH), spun off from the Sara Lee Corp.; Mondelez International (Nasdaq: MDLZ), spun off from Kraft (Nasdaq: KRFT); and Phillips 66 (NYSE: PSX), spun off from ConocoPhillips (NYSE: COP).

My favorite way to invest in spin-offs is to gain diversified exposure to the best spin-off companies through the Claymore Beacon Spin-Off ETF (NYSE: CSD).

The top 10 holdings include:

It goes without saying that the stock market is an extremely competitive arena. Money management firms spend millions to find profitable niches, strategies and tactics.

Where short-term trading is concerned, the advent of high-frequency trading has made speed more important than ever. This niche has become so competitive that some firms have relocated their operations to their stock exchange's facilities to get their orders to the exchange before the competition's.

Fortunately, long-term investors don't have to concern themselves with the arms race in high-frequency trading. While large firms fight it out for microsecond advantages, long-term investors can exploit time-tested niches. One such niche outperformed the S&P 500 Index by an average of 13% from January 1995 to July 2012, including a period of 45% outperformance between 2000 and 2005.

However, the success of this strategy hasn't captured investors' interest. One reason, to be frank, is that it's a little boring in comparison to other investing strategies. Another is that after the catalyst for this strategy occurs, shares often trade lower for the first month or so. A third is that this strategy was decimated during the 2008 financial crisis. These factors appear to work in unison to spook many investors despite the high returns.

This strategy is known as spin-off investing. It entails buying shares in a company that has been spun off from a larger parent firm. A parent company may have many reasons for spinning off a subsidiary, but typically, the primary goal is to increase shareholder value by jettisoning debt and slashing expenses.

Yet shareholders of the original company often dump their granted shares of the new, smaller company. This is shareholders in the parent company often have no interest in owning the spun-off company, so they sell their shares, sending the spin-off's stock lower -- at least initially. However, other investors often recognize the value in the spin-off's lower price, sending shares on an upswing.

Spin-offs are often successful, and one main reason is that the spin-off's executives are frequently given greater incentives -- in the form of stock options in the new company -- to succeed than they may have had at the parent firm. Think of a spin-off as a startup -- but one with a seasoned executive staff, an existing business model and customer base, and direct experience in the field.

You can search for pending spin-off companies on the Securities and Exchange Commission website and by keeping up with the financial news. Several of the most successful spin-offs include Hillshire Brands (NYSE: HSH), spun off from the Sara Lee Corp.; Mondelez International (Nasdaq: MDLZ), spun off from Kraft (Nasdaq: KRFT); and Phillips 66 (NYSE: PSX), spun off from ConocoPhillips (NYSE: COP).

My favorite way to invest in spin-offs is to gain diversified exposure to the best spin-off companies through the Claymore Beacon Spin-Off ETF (NYSE: CSD).

Who says that the market doesn't trade off of inside information?

The short interest in glass and fiber maker Corning (NYSE: GLW) more than doubled in the two weeks ended Oct. 31, to 83 million shares. (Data were released Nov. 11.) The short-interest surge came just days before Apple (Nasdaq: AAPL) said Nov. 5 that it was going to work with GT Advanced Technologies (Nasdaq: GTAT) in the production of touch screens at an Apple manufacturing facility.

To be sure, the deal was a great win for GTAT, as my colleague David Goodboy noted a few days ago.

But GTAT's win shouldn't be seen as a real impediment to Corning. And short sellers, even as they traded on this news early, will still likely get burned -- because Corning is shaping up to be both a deep value play and a growth play.

Merrill Lynch's Wamsi Mohan was one of the first analysts to weigh on the Apple/GTAT linkup: "This announcement does not change our opinion of the current limitations of Sapphire (or of) the price and feature advantage of Gorilla Glass. In our view the applications are likely to be more niche and Gorilla's position in the touch market relatively unchanged." He has a "buy" rating and $22 price target, representing 30% upside.

Mohan's specific concerns: The Sapphire production process is "orders of magnitude more expensive than Gorilla Glass," which would likely add $20 to the cost of each iPhone if it were used in that device. The high cost relates to low manufacturing yields and arduous production techniques, he notes, adding that "Sapphire is heavier than Gorilla and does not perform as well in drop and tumble tests." That's why Mohan expects the AAPL/GTAT linkup will likely serve a small niche product, such as the iWatch.

As the market continues to flirt with all-time highs, a considerable amount of churn is taking place beneath the surface. Investors are increasingly flocking to companies that are seemingly big and safe, while shedding exposure to smaller and riskier names.

It's a logical move, considering the current bull market is getting along in years. Indeed, I extolled the virtues of mega-cap stocks back in August, and you can still find some great bargains among America's largest companies.

Yet if the market is going in this direction, it also means that smaller stocks are falling to levels that hold real appeal. And in no sector is this divergence more apparent than in biotechs. The biggest biotech stocks appear fully priced -- while their smaller brethren are now far from their 52-week highs.

Imagine buying a used paperback book for $5, reading the first few chapters, and then finding a $1 bill tucked neatly between two of the pages. Because the book came with a little cash, the net purchase price essentially drops to just $4.

That's essentially what we see with cash-rich companies like GPS-maker Garmin for example. The company holds $13.84 per share in cash with zero debt. So a potential acquirer that bought all the outstanding shares at the recent price of $46.25 would really only end up paying about $32.41.

Of course, buying a few shares doesn't mean you can march in and demand payment. But as a stockholder, you do have a pro-rata claim on that cash. And while you can't spend it freely like the $1 in the book, it can still be used in numerous ways to enhance shareholder value.
That money can be used to repurchase stock, to make a special dividend distribution, to pay down debt, to upgrade equipment, to fund an acquisition... you name it.

Equally important, having access to that much cash negates many of the financial worries that can cripple a stock. Expanding companies need capital, and raising it isn't always easy (or cheap). Some cash-strapped companies have no other option but to issue more common shares or borrow money at exorbitant rates.

So deep cash balances not only yield positive changes, but they can help companies avoid negative ones. Simply put, cash is the lifeblood of a business. That's why I invest just as much time analyzing the balance sheet as I do the income statement.

Here are a few more companies that have a nice stockpile of cash and a dividend yield above 3.5%

You can keep up with all of our posts by signing up for our daily e-mail. Thousands of other readers already have. Don?t miss out!

Quote of the day

Barry Ritholtz, ?There are some people who have yet to pay their tuition to Wall Street University. They shall do that over the course of their investing lifetimes through high fees, unnecessary taxes, costs and expenses.? (Big Picture)

A steady scan of the financial headlines these days implies that it's the golden era of dividend investing.

But it's not true.

Though many companies are boosting their dividends at a solid pace, dividend yields remain far below the levels seen back in the 1970s. Back then, companies earmarked the vast majority of their profits for dividends. Today, payout ratios usually hover below 35%.

If one investment theme is surely at a high point, it's stock buybacks. As I noted two months ago, companies have bought back more than $1 trillion since 2009, and the pace of buyback activity has actually grown stronger in 2012 and 2013.

The timing is curious. The market has posted impressive gains since bottoming out more than four years ago, and many stocks are trading near all-time highs. In the past, companies would only pursue large stock buybacks when their shares were in the doghouse.

Still, it's worth tracking any buybacks plans that promise to retire 10% or even 15% of the current share count. And in the current earnings season, we've seen a fresh batch of hefty plans that fulfill that mandate. Here are a dozen companies, each sporting a market value of at least $1 billion, which have a chance to make a meaningful dent in their share counts.

Random Thoughts


Each day you look at the market carefully. You study a handful of indices, several hundred sectors/ETFs, and most importantly, a few thousand stocks.

So what did the above tell me yesterday? Well, it was a mixed day (duh implied). Some areas banged out new highs, some areas sold off, and some areas didn't do much at all.

Commodities have lost steam. Energies are now back to where they were around 2 months ago. Metals & Mining are now trading back below were they were over 3 months ago.

The Banks which had broken out nicely in October have now given up all of those gains.

Insurance which was making new highs on Monday has pulled back into its base.

Transports are just shy of all-time highs.

Retail, especially Specialty Retail, is doing well.

Drugs, which had been looking a little questionable, have been coming back as of late.

Defense and Manufacturing remain in uptrends.

I can go on and on about the good, not so good, and indifferent. Again, it is getting mixed.

As I preach, markets, like life, have to be taken one day at a time. And, each day brings a new clue. Monday's action was a lot better than Tuesday's.

The Ps are just off of all-time highs but they are also just about where they were 2 weeks ago. This action has the 10-day moving average flattening out. The Quack also hasn't made any forward progress (net net) in a few weeks. A big up day would make all the difference in the world. More flat to weak days keep us in "show me" mode.

International markets (EFA) have also lost some steam.

I still think if the Quack/Q's take out last Thursday's high they have the potential to accelerate even higher. Unfortunately, each day that passes helps to negate this signal. So, it's important for them to rally soon.

You don't want to argue with a market that is hovering around new highs but eventually, it has to make those new highs. I'd hate to have to start drawing a sideways arrow.

So what do we do? I think the database has been speaking lately. It hasn't produced a whole lot of meaningful setups in quite a while. On the surface, things still look pretty good. However, it is getting a little mixed beneath. Therefore, again, the database could be the telling us to continue to let things shake out a bit. Considering this, focus mostly on the management of existing positions. As usual, honor your stops. As I've been discussing, stops can help to adjust your portfolio. If we continue higher, your shorts will stop out and all you'll be left with is longs.

Futures are getting hit fairly hard pre-market. For the aggressive, look to play an opening gap reversal (OGRe) should it occur. If you don't know what that is, pass. Get educated. Read the articles under Education on my website.

Click here to watch today's Market in a Minute.

Best of luck with your trading today!

Dave
omgmachines.com/ericx
__________

Expert swing trader Dave Landry comments on the charts for the major markets, indexes and sectors for the upcoming trading day in his daily one-minute video.

Make sure your sound is turned up. A new browser window will open and the video will begin playing within a few seconds.

Random Thoughts


Each day you look at the market carefully. You study a handful of indices, several hundred sectors/ETFs, and most importantly, a few thousand stocks.

So what did the above tell me yesterday? Well, it was a mixed day (duh implied). Some areas banged out new highs, some areas sold off, and some areas didn't do much at all.

Commodities have lost steam. Energies are now back to where they were around 2 months ago. Metals & Mining are now trading back below were they were over 3 months ago.

The Banks which had broken out nicely in October have now given up all of those gains.

Insurance which was making new highs on Monday has pulled back into its base.