Well ladies and gents, if you took our advice from yesterday and placed a stop-loss on the Hurco (HURC) position, then you locked in what would have been a little better than a 23% gain on the two-month trade. We drew our line in the sand at $34.40, and though HURC got another bullish start on Tuesday, the would-be profit-takers said enough was enough. After opening at $37.19, shares dwindled down to a low of $34.02 before closing at $34.82. Being as realistic as possible, we would have sold it at $34.30, translating into a 23.5% profit. Not bad for a couple of months. Advertisement Your MarketClub Trial Has Been Paid For What's better than access to powerful, proven trading tools? Easy, someone else paying for you to use them! MarketClub is proud to announce a close partner has stepped up to cover the trial costs for a limited number of new MarketClub subscribers. You'll have a full two weeks to check the Trade Triangle entry and exit signals, scan for new markets to trade with Smart Scan, and get a feel for the Email Alerts to see if they will fit into your trading strategy. Start Your MarketClub Trial - Cost Covered Advertisement Just for the record, however, we're not necessarily done with Hurco. While the rally over the past several days was too hot to sustain, once we see all this overbought pressure burned off and the bigger uptrend renewed, we could end up wading back into HURC waters; here's still a lot of underlying potential. We'll just have to play it by ear. In the meantime, we're really going to start scrutinizing the stocks we recently added to our watchlist. Two trades just isn't enough to suit me. Economy in Better Shape Than Presumed Somewhat-encouraging news on the real estate front following last week's report of tepid starts and permits for June... sales of existing homes are still firming up, and new home prices - according to the FHFA anyway - were still on the rise through May. Specifically, the National Board of Realtors stated existing home sales hit an annualized pace of 5.04 million houses in June. That's the fourth consecutive monthly increase, and the highest level we've seen since October's pace of 5.12 million. Meanwhile, the Federal Housing Finance Agency said home prices were up 0.4% (month-to-month) in May. Of course, two pieces of data never tell the whole story, nor does one month's worth of data. Yet, that's pretty much all you ever really get from the mainstream media. Since they don't give the full context, we will. Here you go - all the major real estate data for the past few years. As you can see, while construction may be waning, real estate as a whole is still strong. Prices continue to rise, as do overall sales. The only trouble spots are permits and starts, and even those trends haven't exactly fallen off the edge of the cliff yet. The only other major economic data deliver today was June's inflation rate. It fell from May's reading of 2.13% to 2.07% in June. This is still high-ish (relatively speaking), but it certainly pulls the rug out from underneath all the folks who thought May's jump to multi-month high inflation levels was the beginning of significant economic problems. We're sticking with our overall theory on inflation - if years and years of cheap and easy money hasn't spurred rampant inflation yet, it's not likely to do so now. It's going to take some amazing economic growth to give consumers and companies enough buying power to drive any real inflation. And, with the Fed close to turning off at least one of the inflationary spigots, there's just not a lot of the right undertow to spur serious inflation. Ackman Versus Herbalife, Round 2 I don't know how many of you have been following the saga of the battle between Herbalife (HLF) and hedge fund manager Bill Ackman. But, it's been tough to ignore the past couple of days. In fact, I'm so sure you're perfectly aware of what's going on, I'm not even going to bother explaining the back-story to you. I'm just going to give you my assessment of what's really going on while fully acknowledging it's a personal opinion. Psychology 101: Ever heard the term "denial" in reference to someone's assumptions? McGraw-Hill defines it as "A primitive-ego defense-mechanism by which a person unconsciously negates the existence of a disease or other stress-producing reality in his environment, by disavowing thoughts, feelings, wishes, needs, or external reality factors that are consciously intolerable." It's a straight-forward description, right? Well, in my search for the official definition, I also ran across this footnote further describing what psychological denial is: "Denial functions to protect the ego from things that the individual cannot cope with. While this may save us from anxiety or pain, denial also requires a substantial investment of energy." It was the addendum that really got me thinking... look at all the time, effort, and money Bill Ackman has already spent on trying to prove Herbalife is a scam, and for what? Nothing. The stock bounced 25% today, regaining all of what it lost after Ackman threatened (again) to prove the company was an Enron-like fraud a couple of days ago. The fact that the market - a voting machine - sent HLF shares skyrocketing today says Ackman's allegedly game-changing evidence wasn't convincing in the least. Yet, the fact that Ackman has already spent $50 million (in addition to his $1 billion bet against Herbalife, by shorting it) to prove it was a scam makes it clear he firmly believes in has claims of fraud. Folks, I'm not inside Ackman's head nor am I a trained psychologist. I've been around the stock-trading block more than enough times, however, to recognize he's either trying to buy his way out of a bad trade, or he's convinced himself of facts that neither the FBI nor the SEC nor the FTC has seen despite some pretty intense investigations on their part. This isn't to say Herbalife is a standup company with nothing but altruistic intentions. Indeed, I get what Ackman is saying - Herbalife is selling a dream to a lot of would-be distributors who are enticed by an attractive sales pitch. If that's fraudulent though, there are much better companies for Ackman to target than Herbalife. I suspect Ackman started his campaign against Herbalife back in late-2012 because he thought it would be an easy pyramid-scheme target. When it wasn't an easy target though, rather than fold his hand and lose the ante, he doubled down, needing to go into denial to do so. My guess is, he won't be crazy enough to launch a third major salvo against HLF. If he botches yet-another attack and looks like a nut for a third time, he'll lose more credibility than he can afford to lose. A big part of his M.O. is getting other people to believe in what he's saying, and he can't risk damaging his ability to do that. I believe Ackman will start to quietly concede on the Herbalife front from here. That's just me though. What do you guys think about Ackman and Herbalife? Leave your thoughts at the HLF research page. Another Mulligan Kudos to the bulls for hammering out another gain on Tuesday, and doing so on higher volume. We're still not impressed though. The S&P 500 remains unable or unwilling (or both) to hurdle 1985, and until this ceiling is cleared, nothing's really changed. In fact... ... while the market may have side-stepped a meltdown, the VIX has given us a curious bearish hint. See the thicker blue and gray moving average lines on the VIX's chart? Both are right at 11.8 right now. The blue line is the 20-day average, while the gray line is the 50-day moving average line. Well, we're about to see the 20-day line move above the 50-day average for the first time since March. And, that period in March when the VIX's 20-day moving average line was above the 50-day line wasn't exactly bullish. It wasn't bearish, but it wasn't bullish either. Whatever the case then, it's undeniable now the VIX is getting into a new uptrend even if the S&P 500 isn't mirroring the VIX's move by falling into a new downtrend. In fact, it looks like the VIX is using its 20-day and 50-day moving average lines as a pushoff point today. Point being, we REALLY can't afford to be impressed by the market's advance when the VIX appears to be getting into an upward-pointing groove too. Nevertheless, I don't want any of us to assume anything here. Today's action was another meaningless day - a proverbial mulligan. The S&P 500 is within reach of a big break above 1985, and it could happen as early as tomorrow. Trouble is, we're within the same reach of a break below the 20-day moving average at 1970, and this market could just as easily and just as quickly find itself on the wrong side of the tracks as it could the right side. Let's continue to watch from the sidelines, rationally weighing the odds. Wednesday's will certainly be an interesting day to diagnose.