Tuesday, January 16, 2007

Earnings Season Begins

Earnings season is upon us again. So our chances of turning the corner downward appear briefly once more. Unless earnings are, on the whole, not up to expectations, Dow 13,000 seems all but inevitable.

Intel (INTC) is down after-hours, in spite of hitting expectations. And Rackable Systems (RACK) is getting completely clobbered:


My colleague Michael Kahn wrote this morning, "The rally rumbles on and quite honestly we are out of new ways to say that this should not be happening." Well said. The NASDAQ Composite is above even the high water mark of its channel. This rally is based on the same sensibilities as late 1999/early 2000. Just insane.


The S&P 500 is much the same story.


Of particular concern is the Dow Transports. Just take a look at how swiftly it has managed to retrace back to the descending trendline. I have a feeling it could pierce above this, which would weaken the bearish argument further still.


Looking at more history of the $TRAN, you can see how prior breakouts preceded substantial moves upward.


ANDE, mentioned in this space before, remains a good speculative bullish play. It all depends on the stock pushing above the neckline you see drawn here.


BP, which has been much in the news lately, looks like it is forming a tremendous top.


CCJ, although not in any crystal clear pattern, is a short I entered today. It seems to have a very good risk/reward profile.


And Cigna (CI) may have formed an important double top. As always, you must use stop-loss orders!


A short idea I haven't offered here before, I don't think - symbol GEF.


Now GOOG is interesting. It matched a lifetime intraday high today, but actually fell a little bit. Is this a double top? Or does it simply proceed a rush to $600 when they announce their earnings? I certainly don't know.


McKesson sports an interesting pattern with those Fib Fans as a backdrop. Might be a triple top here.


As for MLS, shown below, I'm not saying buy or sell. It's simply a fascinating study in how, once higher highs/higher lows are broken, the trend shift can be devastating. Because it completely morphed into a series of lower highs/lower lows. Fascinating stuff.

7 comments:

Wayne said...

The rally may be insane, but that doesn't stop me from rationally trading it! I know how to trade both sides of the market, so ride it up smiling! And when it turns, ride it down smiling! Only a brief period in the middle where you get stung, and a rational trader has his stops in, right?!

Lauriston said...

I have a funny feeling this bull is not done yet. I have some QQQQ and IWM puts and today I shorted DHI (http://lauristonletter.blogspot.com), but I am somehow impressed with how this market just keeps rising from the dips, even today. I would not be surprised to see a monster rally after AAPL or GOOG earnings or IBM that will stun and wipe out all shorts before the monster drop. I am going to get out of shorts tomorrow and wait for AAPL IBM earnings before I assess again. Just being nimble and cautious here, until we get those lower highs, lower lows...

Jan said...

The financial markets manifested bearish today so I wrote the article Get Ready For A Real Bear Tear This Week And Next http://my.opera.com/prosperingbear/blog/show.dml/690786

mde said...

I am getting burnt by this irrational exuberance.

Des said...

Godammit! I bought CCJ two weeks ago and was encouraged last week. Now I find out that I'm doomed to failure. Apart from that, thanks for the latest post, Tim. I appreciate the time and effort that you put in here.

EddieFl said...

Still short GS and BSC. (Long PUTS).

Way over extended, but JP MORGAN reporting its best earnings quarter in history doesnt help my short cause.

Still GS is showing some weakness.

George DeTellis Jr. said...
This comment has been removed by the author.