Freedom of Choice

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I thought my soul-baring post yesterday on why I am a bear would attract some interest, but I didn't quite anticipate what kind. I'm starting to feel like a polemicist. A lot of comments, a lot of linkbacks, and a fair bit of rabble rousing.

Markets aren't typically very easy to explain, but right now, it is. So here we go: if the indexes soon push above the highs we saw last Friday, it's back to wait-and-see, gosh-life-sucks mode for the bears. If we stay in the trading range established over last week and the week prior, we could be stuck there a while. And if we break beneath the low seen two weeks ago, it's party time. Simple as that.

Let me offer one potentially short-term bullish scenario in the graph below. It could be conjectured that the strength we saw last week was the true direction of the market, and the past couple of days have simply been a retracement. It could be argued that this is just a launching-off point for the bulls and we will continue with last week's strength.


Judging at least from this evening's GLOBEX session and the news that a major homebuilder is looking at sweeping Federal fraud charges, maybe the descent of the past couple of days is more representative of the market's direction. After all, plenty of feckless speculators in the real estate world are just starting to get slammed.

Let me show you what I mean by the highs of last week by way of the S&P 400 MidCap index. $857.23 is the stop price. Bang, it's just that simple. Cross above it, and Tim is unhappy. Continue to sink away from it, and Tim is glad. And the latter is what we all want, isn't it?


Here's perennial favorite $RUT, the Russell 2000. The lines speak for themselves:


The minute graph of the same index shows the support zone the bulls have on their side. There needs to be a robust run through this for the bears to survive.


I like Chevron (CVX) as a short (long puts). Looks like a potential double top, and the risk is quite low.


The DIA is the umpteenth example I could show how this market has shaped up. The stop-loss point is close enough to be relatively low risk, and the potential gains from that huge air pocket beneath makes it worthwhile. The green tint shows the bull zone. The red tint shows the bear zone - - which, as with most things associated with bears, is bigger.



Goldman Sachs has the potential to be a train wreck, which would be fantastic, of course. A stock this expensive can probably some incredible juicy returns for put owners.


Same story with MER. I really like how the investment banks are behaving.


PG represents a more conservative play. I like these giant consumer stocks because the options volume is big enough to get the bid/ask reasonable, and you are not going to wake up one morning to hear that the toilet paper they sell is a miracle cancer cure, sending the stock up 100 points.


RYAAY is tumbling nicely, moving away from that busted trendline.


I've highlighted SPY to beat this dead horse.


Lord knows you're probably not here for charts for instead of the occasional videos I find. Pull out your Facts of Life commemorative bong, light up, and enjoy: