3 Stocks

JPMorgan Chase (JPM) 

After the bell Monday, we got earnings reports from important companies along with word from JP Morgan (JPM) that it will post its results on the 15th instead of the 22nd. Of course this is meant to be viewed as a positive for the company. Keep in mind, the last time the company reported it posted earnings of $0.11, against consensus of a loss of $0.21. 

Even though CEO Jamie Dimon has been elevated to high status on the Street, curious comments and off trading action has cast a worrisome pall over the bank that supposedly came out of these entire debacle smelling like a rose. Part of the problem could be that banks haven't come out of the debacle and maybe it's too early to place the crown on anyone -- even the genius-in-waiting.

CSX Corp. (CSX)

CSX released preliminary earnings for the fourth quarter that came in well short of expectations. The Eastern railroad said it will earn $0.90 on $2.70 billion in revenue. The street was looking for $0.97 cents a share and $2.77 billion, respectively. An interesting note: the company lost $0.27 from its Greenbrier hotel and golf course in West Virginia.

Alcoa (AA)

Alcoa citing a "historic decline in metals prices," the company reported a loss of $1.2 billion during the quarter, or $0.28 a share excluding one-time items. Management also worried aloud about decreasing consumption and shockingly low inventories. Revenues, however, came in $700 million higher than expected. The company softened the blow with a warning before last night, so the stock may not make a meaningful move in either direction today.

Balance

Make sure you have some short positions and also an ETF that gives you exposure to the downside. We have two open positions on SDS. The market is going to keep whipsawing, and I think at some point the major indices could retest their November lows. 

Many stocks that get hit during such a pullback are already oversold and could rebound swiftly (the homebuilders rallied 80% off their November lows and the S&P 500 20%+ before running out of steam). I bring this up because you will have to hold some stocks that are underwater if you believe in the fundamentals. 

Cash is king, so make sure you have 15% of your investing/trading pool set aside for deployment. The most important thing to know is that last year we got stopped out of longs and regretted later -- and got stopped out of shorts and regretted it later -- and that will be the case this year, too. 

The idea, however, is to have some discipline and know that at some point the market will come back and make several rally attempts.