Wednesday, June 07, 2006

Love It

Anyone who has ever been to a Cold Stone ice cream shop knows their three sizes are Like It, Love It, and Gotta Have It. This market easily qualifies as a Love It for me. It is acting - dare I say it - predictable and delightfully bearish. As I am writing this (again, near midnight here in the Silicon Valley) the Nikkei is down over 3% and the GLOBEX is down handsomely. It smells like another down day Thursday to me.

Let's not get too relaxed, however. Our friends the bulls are trying each day to turn things around. The NASDAQ Composite, shown below on an intraday basis (click it for a larger graph) illustrates it's having trouble getting below about 2,150. It needs to decisively crack this level to add to the bearish cash pile.

The Dow 30 likewise has a triple bottom (although it's over such a small amount of time, it's not a very meaningful one). We're below 11,000 now, which is psychologically significant.

Looking at the Dow 30, this time on a daily basis, it seems we've got a nice, clean path to 10,500. I base this on both head & shoulder measurements as well as the location of the Fibonacci retracements. We are plainly below the major ascending trendline that's been in place over three years now. Life is finally getting sweet.

There is a major Fibonacci level at about 1,250 on the S&P 500. If we crack through 1,245 (which should be easy) it's going to be very smooth sailing for the bears.

The one and only index I pointed out last month as risky for the bears was the American Stock Exchange's Major Market Index ($XMI). It had been forming an inverted head & shoulders pattern. This index has done us the kindest of deeds: the formation has failed, and a (smaller) bearish head & shoulders has formed. For a major bullish pattern to fail in its formation is excellent, excellent news. Thanks, $XMI!

I don't really have any specific stocks to talk about, simply because there are too many. I am delighted with my dozens of positions (all of them puts), which are shown in their entirety here:


mike said...


I noticed in your list you still have some healthcare related companies: HNT, WLP, HUM. I had a few of these as well as AET, CMX and a few others but as a group they have all been showing some strength lately so I temporarily closed them out a few days ago.

Do you think they are likely to begin dropping soon after a pullback or is it likely that if the market continues to deteriorate they will hold up as many of them are economy independant?

Since they are pulling back up nicely I wasn't sure whether this represented another good shorting opportunity or a message to stay away from them.

Hurricane5 said...

Intraday alert: NTRI is below $62 a share. I am backing up the truck for an additional 200 shares.

Dave said...

you must be in Gotta Have it mode as the nasdaq, dow, etc continue to make lower lows...

I wish I could be there with ya buddy, but my damn motherboard fried out of no where yesterday and I'm out of trading commission till monday. Hopefully the market saves some of this fun for me.