What's going on?

So what is going on with the market. One only needs to look at the VIX index see. The VIX index is:

The Chicago Board Options Exchange SPX Volatility Index that reflects a market estimate of future volatility, based on the weighted average of the implied volatilities for a wide range of strikes. 1st & 2nd month expirations are used until 8 days from expiration, then the 2nd and 3rd are used.

In simple terms, it shows the volatility of the S&P 500. For example, if the S&P 500 opens the day at 1455 and stays between 1450 and 1460 all day, volatility is low. If it moves between 1400 and 1500 then volatility is high. Easy enough.

With that said, between Apr and July 15th the index averaged 14.05. From July 15th to EOM, it averaged 19.44 ending at 23.52 today. Volatility is increasing.

The reason vol (volatility) is increasing is simple. Housing. It all revolves around housing right now. The market wants to go up but every other day something negative about the housing market comes out. You would think that the worse case scenarios would already be baked in.

Why does housing have such an effect? To put it simply, the economy is run by consumer spending and if that spending dries up, then the economy and the stock market go down. So if consumers have to allocate their disposable income elsewhere, like higher mortgage payments than businesses don't sell as much and they miss earnings causing stocks to go down.

More later...

CLNE & TASR

CLNE ended up $1.55 or 9.74% on the day. It popped right around 10am when a Reuters article detailed Boone Pickens trip to China. I think this stock is going to keep running. I will buy more on any pullback.

TASR has been in the headlines lately and is on fire, up more than 123% YTD. The stock met some weakness today when a analyst downgraded it but still reaffirmed long term bullishness on the stock. I think it has the potential to go up another 50-60% by the end of the year and started to build a position. I will look to trade this stock. It is hard to put a target price on this stock since it doesn't really have any competitors to compare it too. I am looking at it as a momentum play. It's current PE is 110 which is certainly not sustainable. EPS is $0.15 ttm. Analysts have this years EPS being $0.22 so that is a $24.29 price target with the same multiple. If we see a surprise on 10/25 the stock certainly hits the $24 mark. I will error on the side of caution and use $20 as my target and re-evaluate if we get there.

Up 11%!

CLNE is up over $1.70 today (11:00am). That is about an 11% gain. Not bad for my first pick. I am going to wait to see what happens over the week but I would be in the market to pick more shares up on any pullback.

CLNE

Clean Energy Fuels

IPO was in May earlier this year. One of the biggest shareholders is Boone Pickens. Billionaire oil tycoon who has been an advocate of clean energy for sometime. He is currently in China building relationships.

Think about it:

China is an emerging market that is on fire with double digit growth. They have tons of money in reserve. More importantly, they have ~1.3 billion people (US has 300MM). With the world population at about ~6.6 billion, China has ~20% of the worlds population. That is a lot of people that need to travel. They already have a smog problem bigger than California's and they have already adopted clean fuel in over 2000 of their mass transport buses. If CLNE can book some business there, I think this stocks climbs and climbs fast.

In addition to working on China, CLNE operates in the US and soon in Peru.

Disclaimer: This is a risky small cap play. Don't put all of your retirement in it.

Long term or Short term?

The answer, I think, is both. The market is dynamic and you should be too. There are long term plays that you hold for the long term but sometimes you need to do some short term pruning. Think of a long term hold as a plant. Every now and then you need to cut some of the wilting leaves off so the plant will thrive. Case in point:

I own CAT. I like CAT for the long term, especially with global growth on fire and emerging markets having the need for heavy machinery. It has had a nice run lately and going into earnings (yesterday) I was thinking maybe I should sell some and lock in some very nice profits. I decided against it and they reported below expectations and now the stock is down over 4% this morning.

If I would have done the prudent thing and sold some shares locking in my profit, I would have cash in my pocket and the opportunity to pick up some lower priced shares today. Lesson learned.

Whenever volatility is going to pick up (ie. earnings time) prune the plant and take some profits!