Monday, November 06, 2006

Electile Dysfunction

This is a really dangerous time for us bears. All eyes are on the election right now. Setting aside whether the Dems or the Reps prevail, the fact is that if the market breaths a sigh of relief on Wednesday morning (for whatever reason), there are important "lines in the sand" which could be taken out by the bulls. If this happens, I'm ready to hang up my bearish hat until probably mid-January of next year (and even then I would consider whether to don it again or not).

The NASDAQ Composite represents this danger well. Look how close it is to pushing above the double top it has made over the past several months.


The Russell 2000 also shows this danger, but in a different way. Look at the downward-pointing arrow. If the $RUT pushes above this level (and it could easily be tomorrow or Wednesday), there's going to be a very hefty stake pushed through the bear's heart for the rest of the year.


If the market does push higher, the $SOX is probably not a bad place to look for calls. It seems to have found a short-term bottom.

The $XAU (gold and silver), on the other hand, might be a nice short play. I've circled what seems to be a possible turning point. I've got puts on this index right now.


One stock which shows just how hefty the bull run has been in mega-investor Warren Buffett's BRK.A, which now trades well over $100,000 per share!


I've mentioned Fluor (FLR) before as another good bearish pattern, but it merits repeating.


And let's bow our heads for a moment and remember departed reader hurricane5, who held us HANS as one of the "one decision" stocks to own. This poor beverage stock has lost 50% of its value. It had an unbeliveable run, but you just knew this thing couldn't sustain itself.


In closing, take a look at LEH. This stock is so typical of what I see right now. A double top which could be taken out and blow all the bears away. Or, if it weakens anew, could be a fantastic short to have. But this election isn't going to clear up until Wednesday. Until then, we can only wait and see.

6 comments:

Unknown said...

Tim wont be able to follow through on his advise. He will be bearish in the next few posts.

kapil khanna said...
This comment has been removed by the author.
Unknown said...

As Lord Keynes said, "the market can remain irrational for longer than you can remain solvent ... "

downosedive said...

costas, pb and the rest. Yes, you are right, bull for the sheer hell of it. The trouble is we are too logical to join in, so we just sit and wait for a turning point. Just shows how dangerous it is to be short with such a quick about turn back upwards. A short needs to be perfectly timed and to be held for just a day or two, otherwise risk being caught. We all thought Nov 7th would be a turning point downwards, but oh no, they are now saying that a close call is a good result and that that will cause the markets to rally even further, which of course they are

Unknown said...

Since the breakout of this bull market in March '03, SPY has NEVER made a sell signal on PNF chart. Price objective was met way back at $105. Day trade or swing trade these markets up 'til they die.

mac said...

Is it me or did we just witness a shift in market momentum today? Sure seems like the market may have had it's last big hurrah for a bit. Wake up bears. Hibernation may be over!