I’ve been meaning to write a bit about education, it’s been on my mind lately for many different reasons.  I have a friend who is looking into starting a charter school here in NYC, he’s an extremely bright guy with a lot of excellent ideas.  Another person very close to me is looking to return to school for their master’s degree, and there has been a great deal of literature lately regarding changes to both the primary and secondary education systems in this country due to our current economic situation.  Students in California rioted this week due to school budget cuts, they blocked a freeway, and there are mass demonstrations going on in NYC regarding the closure of under performing schools.  I’ll be talking about this in more detail this week hopefully, but for now…

Here is your weekend reading:

I’m leading off with something funny this week, because it’s so damn good, just watch (John Stewart)

I’m going to continue to stress the importance of cloud computing, it may be the most important aspect to making great mobile a reality (Voxeu)

Palm is fucked, there are no two ways about it, the smoke is clearing and their recent earnings guidance smashed many of the mirrors (Barrons)

Technology continues to bring down the price for content, the trend continues with iPad e-books (NYT)

I don’t have words to express how awesome the gold medal hockey game was, it was perfect (NHL)

The real unemployment rate is a fingernail from 20%, it’s only going higher (GALLUP)

What a great piece of prose and good advice from Barry, make sure you read this one (The Big Picture)

If you follow my Twitter stream, you know that on several occasions when I have been inebriated (to put it lightly), I have proposed this.  I’m being completely serious now when I say, I will at some point start a fund to do this, I am already speaking with lawyers, and I will change the way that secondary education is paid for.  More on this at a later date, but for now, just read (Venture Beat)

What an amazing story about how learning to “teach” has been overlooked in favor of teaching theory, this is so important (NYT)

I am proud to be a part of the New York City tech scene revival building StockTwits (NYT)

For the week, the momentum book was up almost 4%, grabbing 65 basis points of alpha.  On an absolute basis this was obviously an excellent week.  On a relative basis I am disappointed in my performance.  With my level of confidence in this week’s rally, just go and see what I wrote late last week, I should have added higher beta names to the portfolio and took advantage of a surging market.  In what I believe will be a range bound market this year, this was one of the better opportunities to put points on the board, and just keeping pace was not acceptable.

I continue to hold certain names in the portfolio which have lower correlation to the market, this served me well during the pullback but was a major crutch this week.  I’ll be giving this some thought over the weekend as energy names are setting up for a major rally.

The education space continues to be a focus of mine.  I hold large positions in Devry $DV and Capela Education $CPLA.  Both sport excellent fundamentals and are making new all time highs on great momentum.  Short term, these positions are extended, but I am reticent to sell because I believe we could easily see large upside gaps in the coming weeks.  Both names sport large short positions which are currently getting squeezed after good earnings reports.  For the love of god I can’t understand who is betting against the education industry with this country’s level of unemployment and the views of our president.

The two service sectors I’m focusing on are food and airlines both show great relative strength and good momentum.  I took a position mid week in $PAC but sold out late Friday afternoon as I had good gains and the name was extended to the upside.  I still own $ALGT which hasn’t budged in a few weeks now, I’m getting impatient, it needs to crack 54 to really start squeezing the shorts, of which there are many.  I slowly sold out about half of my $CMG position this week as it surged, but would like to add back on any dip.

Major winners this week included $CMG $DV $IPXL $MJN $PAC $F and $HAS.

Laggards this week, because there were no losers, included $NTCT $SFSF $SBAC $ALGT $CTRP and $PCLN.

New positions added this week include $INCY and $PRAA, $PAC was also added but sold before the close Friday.

Positions sold this week include $INFA $CTXS $IMAX and $RAX.  I sold $INFA dude to it being extended, $CTXS and $RAX were under performing in a strong market, and $IMAX was a wild ride after getting smacked down mid week, but after adding to the position at the bottom I snuck out with a small win.

Look, the market is extended here and needs a rest.  I’m seeing a lot of overbought indicators now, not only on the shorter term time frames, but on the daily time frames, many RSI and Stochastic readings are pretty high.  I doubt we just roll back over, but a week or two of sideways action makes sense here.

There aren’t too many times I’ll say this, because I’m not one to toot my own horn, but I’m on tilt right now, especially on the shorter time frames, the long / short book is killing it, patterns are playing out as they should given the plummeting volatility.  But while I came into this week confident as hell, I have far less conviction going into Monday morning, and I’m not afraid to admit that.  I raised a some cash Friday afternoon, above 15% now in a strong market.  My advice, if you don’t have conviction, step to the sidelines, I just don’t see the market melting up to my final rally target of 1250 just yet, it’s going to be a grind.

Anyway, I’m selling stuff into the close today, we are overbought and I have large gains from the past few weeks.  My cash is above 10% now and I’d like to get it towards 20 by the end of the day, if not higher.  I’m cutting stuff that hasn’t performed and stuff that is way extended, like Ford $F was this morning, I had nice gains and it got the axe.  I’ll look to get back in there on a pullback.  $RAX was an example of the former, it just wasn’t performing, it’s gone as well.

Instead of selling whole positions I’ll probably just lighten up in a bunch, I like my book.  Two specific names that are poised to break out are $V and $NTCT, you can buy them here.

I am a little dumbfounded by the action in $AAPL, what caused that large gap this morning?  Anyway, if it consolidates above the highs I will look to take a position, the weekly chart looks too good not to be involved in this one.

Crude $CL_F is on its way now, look to buy dips.  As well, I will be looking to rotate into energy names on the next market pullback.  Let’s all say it together now…… Drill Quip $DRQ is my favorite name.  Very good, you are dismissed.

The situation revolving around Greece is starting to feel eerily similar to that of Bear Stearns mid 2007.  As we know now, Bear Stearns was really only the tip of the proverbial ice berg when it came to the amount of crap the banks were in, the fundamental picture of the housing market, and the losses yet to come in many asset classes.  The panic selling in the equity market during the Bear Stearns crisis was heavy and dramatic.  You may not remember it well now, because of the “liquidation event” that took place during the Lehman Brothers crisis which dwarfed it in scope and scale, but it really was a fearful time.

And when it was over, many sounded the all clear siren.  It seemed as if we had been through a crisis and come out the other side, those who had bought the dip would be rewarded for their bravery and view that the Bear Stearns event was in fact the singular event of the housing sell off.

This was obviously not the case.  Bear was in fact just the beginning, it was the first casualty, it was the warning bell that should have been ringing in everyone’s head.  The housing market was broken, the economy was cracking, and if you looked under the hood, market technicals were deteriorating even after the recovery from the Bear Stearns sell off.

Fast forward to today.  We have known for some time that there are fundamental cracks in the sovereign debt market, similar to the view held by many in early 2007 regarding the housing market.  We got a shot across the bow in late 09′ in the form of Dubai.  And now, in early 2010 we have seen a real crisis in Greece which has taken the equity market at one point 10% off its highs, the Bear Stearns crisis sold us off a little more than 11%.  From a technical perspective these two events seem to have produced a similar pattern, and now, the equity markets have recovered and look poised for an assault on the highs.  Back in 07′ they did eventually make new highs, but on lighter volume, breadth, momentum, and many other technical indicators.  As the market recovered and investors breathed a sigh of relief that Bear Stearns was behind us and taken care of, the iceberg sat submerged.

It’s time now to think about Greece in terms of Bear Stearns.  Is Greece the first punch to the gut in a larger fight as was Bear, or is it a singular contained event?  We know there are other nations in bad shape economically and which have rising debt to GDP ratios, the PIIGS.  And back during the early stages of the housing crisis we knew there were other sick banks and hedge funds.  How far will this crisis spread and is it a systemic issue as was the subprime mess of the US housing market.

I don’t have these answers, and to be honest, I’m not qualified to be examining the sovereign debt market closely.  I will be doing an extensive amount of reading over the next few weeks on this topic and I urge you to do the same.  Many believe that commercial real estate will lead the next leg down, and although I am fundamentally bearish there, I think the government has the situation contained.  The sovereign debt crisis though may be bigger than anyone can handle, and it may be in its first stages.  I need to do a lot more work here, and will be keeping a close eye on what’s under the market’s hood over the next few months as we test the highs.

StockTwits, a micro blogging / messaging platform has been around for less that two years in its current form, it continues to iterate and transform, providing users different tools to both contribute and listen.  StockTwits may be in only the 3rd or 4th inning in terms of its ultimate set of functionality.  How can we possibly expect to have a full understanding of its value after such a short period of time?

Longer form blogs have been around awhile, and grow from the newspaper or magazine column style of writing.  But the ability for nearly anyone to start an investment or econ blog easily is new, there has been an explosion these past few years of excellent content by completely unknown people.

There are really two different conversations to be had here.  The first, how should investors and traders use StockTwits and blogs in their trading.  The second, how should people contribute to these platforms.  The latter is a far more difficult question to tackle, one that I will leave for another time, there are many more variables to consider there.

The main knocks against platforms such as StockTwits are as follows, I will cover them first before moving on to the real value.

#1 – StockTwits is just noise, I get no value from looking at the all stream, it’s just a distraction.

If you’re focusing on the all stream, that’s your first problem.  Do you focus on the Twitter all stream?  No, I didn’t think so.  The philosophical idea behind micro blogging platforms is that anyone can say anything, and if they allow, everyone can see it.  Your voice is given the same opportunity to be seen as anyone else, it is a complete meritocracy.  Stop focusing on the all stream and start finding specific people to follow, more on this later.  As StockTwits grows, the all stream will continue to grow more and more noisy.  Noise and spam are two different things though, noise should be defined as anything which doesn’t pertain to information which helps you, spam is information that doesn’t give anyone value.

#2 – The people on StockTwits are all just college kids or retired farts who don’t know anything, listening to them will only hurt you.

Let’s say, just to entertain this ridiculous claim for a minute, that this is the case.  Well then use it as a contrarian indicator and trade against the herd.  If as you say, they don’t know anything and will make all of the classic herd mistakes, that’s valuable information.  Frankly this is a stupid claim given that there are professional money managers and traders on StockTwits every day sharing their trades and ideas.  Yes, there is a population of green traders and investors sharing their ideas, and if that’s not what you want to focus on, don’t chose to follow them, it’s really that simple.  I would caution you though not to dismiss this group of amateur traders, I have seen some excellent ideas and information flow from these people, some of which I have directly acted on.  Sometimes, just having more eyes on the market is valuable, no one can see ever important movement in the market.

#3 – I can’t see anyone’s performance record and qualifications, so why should I listen to them.

True, you can’t find a performance record of people who contribute their thoughts to StockTwits, or their academic/professional credentials.  But why should this matter?  You should be judging these people on the quality of information they are providing you, not their track record or diploma.  I’ll listen to a college kid trading on his time between classes just as well as a hedge fund manager as long as the information he’s providing is actionable and quality.  I don’t care about how much money they are making in the market, in fact I could care less if they were losing money, just as long as their info helps me with my own trading.  As the saying goes, those who can’t do, teach.  Well maybe there are a ton of people out there who understand market dynamics and what trades should be made, give great ideas, but are not successful at trading themselves given their personal disposition or economic situation.  Stop worrying about who the people are and start focusing on the information they are giving you.

#4 – It’s all just day traders on there using technical analysis, I’m a serious investor, day trading is for small timers and technical analysis is a bunch of voodoo.

First, on the issue of technical analysis, go read this post by John Lee before you wipe it aside.  Some of the greatest traders of all time use technical analysis.  Second, I know a ton of guys who make far more money than you day trading, they just don’t do all of your fundamental masturbation, and end up at the same place, with a phat bank account.  No one trading style is any better than another, trading is all about banking coin.  If you’re not a day trader, fine, neither am I, go find the guys who are swing traders, fundamental traders, global macro traders, they’re all there.

#5 – This is just another stupid Yahoo message board, it’s all just rumors and junk.

I won’t even dignify this comment with a response, you obviously haven’t taken the time to understand the platform, take another look.

So how should you use StockTwits?  First, understand what type of trader / investor you are.  If you are an equities day trader, go to the equities stream and watch for people who day trade, judge them on their trades, look at their history of information, take a look at how many followers they have.  It’s no surprise that quality people have a lot of followers.  If you are a forex trader, go to the forex stream.  If you trade a longer time frame on many different assets, look for people who are giving more detailed ideas regarding the fundamentals of the assets they are trading.  Ask the stream who to follow for your trading style, you will instantly get a response giving you the best of the best.  Go to the suggested users stream, they are suggested for a reason, StockTwits watches the community with intimate detail to screen for those who give only the best information.  StockTwits is all about discovery, discovery of ideas and people, use it as such, don’t just watch the all stream.

So you’ve found the people who trade a similar style as you and trust them to give you quality information, what next.  Here’s my advice, use the information in your stream as both an idea generation machine and another set of eyes on the market.  Should you be blindly following people into trades, hell no.  Just as Jesse Livermore said, the first rule of being a stock operator is to never take a tip.  Once you enter a trade that isn’t your own you are at the mercy of that person to get you out, which is the most dangerous thing I can think of.  When you see someone enter a trade, take a look at it, do your own research, use your own system, and then decide whether it is right for you.  Ideas are valuable, great ideas are worth a lot of money, which is why certain traders have paid products.  They have proven, through their performance and following that their information is valuable, and good for them, just as other forms of content should be paid for if there is enough demand, so should investment ideas on StockTwits.  Hey, we are traders, we should believe in the free market, supply and demand.

Personally, I don’t care if someone just posts trades, or only posts ideas without posting their trades, as long as I can use their messages as actionable information, they are useful to me.  As a technical analyst, the same goes with charts.  I don’t care if you post your entry and exit on the chart, just as long as your chart gives me insight into what is going on in that asset, maybe something I didn’t see.  I have used Chart.ly extensively to source ideas, and follow a group of traders who traffic in a similar style and similar names as I.  They have been invaluable to my trading, giving me another set of eyes, and sometimes making me see the chart in a way I may not have on my own, a valuable asset.

As for blogs, use them the same way.  Do not blindly follow a blogger’s view or his portfolio.  I’ll use myself as a perfect example.  I post an accurate representation of my clients’ momentum portfolio on a real time basis for all to see.  You should be using it to see what I’m invested in, how I’m thinking, and what I’m focused on.  If you want someone to build you an investment portfolio or trade for you, give your money to a professional money manager.

As I said earlier, StockTwits and the blogosphere will continue to morph and add features.  This space is so new, there is so much yet to be learned regarding its use.  But I know one thing above all else, giving everyone the ability to share their ideas on the same platform in a meritocratic way is insanely good and valuable.

This is a chart posted last night by on of my favorite technical analysts, @theEquilibrium.  There are major momentum indicators on the chart giving warning signals to those who are long the dollar.  RSI, Stochastics, MACD and WM %R  all shout sell.

I’m making a call here that you should begin to position your trading in a way which assumes if not a move lower in the dollar, at least a halt in its uptrend for a time.  I’m taking other fundamental factors into consideration, including the record short position in the Euro $EURUSD.  I can see a quick squeeze coming in the Euro and believe that Greece will be rescued.  Keep your eye on crude $CL_F and the smaller oil service and driller names.  Keep your eye on gold $GC_F here as well, the action last week was quite bullish.  The miners are a difficult trade, but if you’re willing to give your position some wiggle room now may be the time to dip in.

Short term target $USDX, 79.50.

Thanks again to @theEquilibrium for the excellent chart.

The falling wedge patterns on the indices are extremely bullish, and if Goldman Sachs $GS and Citibank $C can recapture 160 and 3.50 respectively, the market should be off to the races.  In fact, while I’ve avoided the financials like the plague for what seems like an eternity, I’m starting to get interested.  Certain insurance and foreign bank names are showing good relative strength.

The heart of my exposure continues to be in technology and services.  I’ve also added decent exposure to healthcare as the biotech space is currently surging.  Energy is definitely on my radar right now, I took a shot at $DRQ on Friday after it was smacked around on the open, but didn’t see the dip buying I expected, so I exited the position with a small loss.  I’ll be focusing on the smaller driller and energy service names instead of the big boys.  Major M&A action is going to take place imminently, we got a little taste this week with the buyout of Smith International $SII.

It was oh so delightful to see the action in $PALM this week.  This is such a great example of the fact that although in the short and intermediate time frame, fundamentals can be wiped aside by capital flows and momentum, in the long run the fundamentals matter and a company has a real value based on its earnings.  Was I short, no, unfortunately not, I don’t have the patience or mind set to be a successful value investor, on both the long or short side.  The Palm story was all smoke and mirrors from the beginning, one last ditch effort to get acquired by an even more incompetent and uninnovative company (Nokia?).  This week the stock got what it deserves, a pounding.  By the way, Motorola $MOT is next in line to get whacked, same story, all smoke and mirrors, no one bought the Droid and no one ever will.  $MOT is a short to 5, at least.

Another market catastrophe  this week took place in Game Stop $GME.  Their business model has been broken for a long time as Wall Mart $WMT entered their space and crush them on margins.  If you were a money manager invested here, you should be fired, now.  Nothing about that chart, the earnings, or the story said to own this stock.  It’s been a crazy ride on the short side, and I’ve participated at times, but this thing could really go to zero at some point.

Winners this week included $DV, $CPLA, $IPXL, $SBAC, $CREE, $CTRP, and $MJN which finally broke out on Friday.  The $IPXL earnings were gangbusters and this is a stock I can see being a huge winner.  The education names are on fire and I love their low correlation to the overall market as I’m heavy in tech.

Losers this week include $V, $NTCT, $ARUN, and $ALGT.  I’m getting a little frustrated in $ALGT as the airline sector was hot Friday but Alegiant did not participate.  Visa is also having issues but I’m more likely to give it a longer leash.  The pullback in $ARUN looks constructive, I expect to see the next leg in the coming week, if it falters from here I’ll be banking more profits there.

I sold whole positions in $DECK, $PEGA, $PCLN and $DLM this week.  Though, I added back the Priceline position on Friday.  $DECK was the only mistake, they crush earnings Thursday after the bell and were up greater than 10% the better part of Friday.  Oh well…

New positions in Ford $F, $SFSF, $GMCR, $IMAX and $HAS were added this week.  I’ve been wanting a piece of Imax for a while now as well as those guys at Green Mountain who make coffee pots.  Personally, I don’t drink coffee, I try to stay away from dependent substances, primarily because I have an addictive personality.  I also just hate the taste of coffee.  But people are buying these things left and right, we just got one for the office, and the trend is excellent.

After you’re done fighting people at the store for your Kourig machine on Sunday morning, don’t miss the gold medal hockey game, USA vs Canada.  I could talk about this for hours, but I’ll leave it at this.  Although the Americans are not nearly the underdogs that they were to the Soviets in 1980, and have already beaten Canada once in this tournament, do not underestimate their disadvantage in both skill and size compared to Les Habitants.  Yes, the Americans are all bonafied NHL players, and most stars,  they don’t nearly match the skill on the other side of the rink.  If they play as a team, as they’ve shown throughout this Olympics they can, they’ve got a decent shot, but it will still be a monumental upset for the books.