The Indexes Change Places

I've noticed - anecdotally, of course - an interesting trend recently. It occurred to me when I went to the Maker Faire in nearby San Mateo, which is basically a get-together of do-it-yourself types. And I don't mean Bob Villa. I'm talking about people who make their own stuff, from robots to housing to computers to clothes.

As I milled around - and this was a very crowded event - I noticed how many nerds, geeks, and Melvins (my term) there were. And I was transported back to 1980, when I attended the West Coast Computer Faire (there's that olde English spelling again....) as a youngster.

It seems to me there is a backlash going on amongst nerd-dom with respect to computers. In 1980, you had to be pretty hip and with-it (ahem....) to really be into personal computers. Nowaways, anyone with a room temperature IQ has one. Sort of the same with cell phones.........if you had a mobile phone in, say, 1986, you were hot stuff. These days, even homeless people have them.

Another thing I've seen supporting this trend is the recently bestselling book The Dangerous Book for Boys, which features not the latest information on PlayStation 3 but instead discusses kites, marbles, and handy Latin phrases. If this cultural counter-trend has anything to it, I find it all quite charming.

As long as I'm ignoring charts, I'll also say that I just finished The Wisdom of Crowds by James Surowiecki. On pages 224-228, he writes:

In 1995, the finance ministry of Malaysia suggested that [short sellers] needed to be punished [with] mandatory caning....Napoleon deemed the short seller "[an] enemy of the state." Short selling was illegal in New York State in the early 1800s while England banned it outright in 1733 and did not make it legal again until the middle of the nineteenth century...shorting was denounced on the [U.S.] Senate floor as one of "the great commercial evils of the day"'...one reason why there isn't more short selling is that most people are not psychologically built to endure constant scorn.

We poor bears! Hated throughout history.

I noticed MarketWatch was touting the idea that the S&P was at a new high. Not quite. With their tortured logic, the S&P's high today was higher than the highest closing price. Well, yeah, that's true. But that's comparing apples and oranges. Who cares?

According to my data, the highest price reached by the S&P on an intraday basis was 1552.87 on 3/24/2000, and the highest closing price was 1527.57 on the same day Today's high was 1529.87 and the close was 1525.10. It's a pretty sure bet there will be a new high on the S&P 500 tomorrow, but let's at least wait for it to happen before touting the news, shall we? Anyhoo, here's the $INDU:


The indexes, until recently, have had all their firepower in the Dow 30. That was not the case today. The Dow actually inched down in price, whereas the Russell 2000 blasted higher by 1.21%. It seems the small caps are finally playing catch-up.


The Chicago Mercantile Exchange (CME) inched down today and continues to shape a nice topping pattern.


I like to look for stocks that are far away from their supporting trendline and seem to be flipping around to a downward direction. CSX fits this.


ESS looks like it is inching up toward its neckline, which could make for a relatively low-risk head and shoulders pattern to play on the short side.


JC Penney also is forming its head and shoulders cleanly. Of course, one must be cautious to trade incomplete patterns, as a single price bar would render it moot.


KRC is another homebuilder with a similar pattern forming like ESS.


On a final note - one frequent commenter, Gary, has mentioned the Commitment of Traders many times in the comments section. I was intrigued and did some basic research, but I find this data difficult to interpret. I guess I'm a sucker for easy-to-read graphs. I would appreciate his illuminating this issue in the comments section to give us a bit of a tutorial on the subject, since it sounds interesting; thanks in advance.