Sunday, July 22, 2007

The Slope of Hope


I am moving over (if all goes well) to a new blog publishing platform. From now on, please go to:

I would REALLY appreciate your comments (not here, but at the new site) about what you do and don't like about the new platform. I have done almost no customization of it, so it's kind of sparse. But I'd like to fine-tune it with your help. Thanks.

Friday, July 20, 2007

Home In the Range

What a week! And a great week it was.

For those of you insane enough to have owned July puts on Google until today, congratulations. The slight earnings disappointment from GOOG nicked $40 off their stock price at one point, and naturally the options were going insane.

The sea-change that has taken place is that all the sub-prime woes have elevated the volatility in this market. It's very plain to see from the $VIX graph below.

But this market right now is all about one thing - range, range, range. As David Byrne once sang: "I go up and down/I like this/curious feeling." If you are able to pay close enough attention to it, and you've got your groove on, you can make a lot of money.

But a glance at the Dow graph below shows that the price is currently about in the middle of a very sweeping range. And now we're in no man's land. Do we bounce off the horizontal line and fly well above 14,000? Do we push our way through the muck beneath that line and start and honest-to-goodness bear market? Or do we continue to fart around ad nauseum. I dunno. And you don't either.

The Russell is even more "range-y". Hell, I was in and out of calls AND puts all day long on this, and nary lost a cent in the process. It was quite a ride. But I'm about as flat as Kate Moss right, since I'd rather enter Monday morning with a relatively clean slate. (e.g. mountains of cash).

One last intraday index to show you - the S&P 500. I'd say we are at an important "bounce or break" point here. It will take a lot of strength for either the bulls or the bears to reach escape velocity from the range shown here, but once either side wins, it's going to be dramatic.

The rest of the charts are just short/put ideas. I sold a lot of "I told ya so" graphcs today (e.g. items I had suggested which went very much as planned), but I don't want to waste your time with those. You know I've got good ideas from time to time, don't you? Once in a while?

Here's BP.

CAH looks ready to break its neckline.

Colgate (CL) might have finished a nice triple top here.

CVX also looks good.

I'm putting GOOG here not as a suggestion, but mainly to show how nicely it retraced its entire hard-fought gain in just a single day. Who knows - those who bought in the low 500s might be very happy in the long run. After all, it's still a nice bullish pattern. But today it was a better buy!

HES, like many oil-related stocks, looks great to short.

I suggested MLM a while back (howdy, Leisa!) It's doing well.

I made so much cash today I decided to risk a bit on a couple of RIMM puts. This sucker has to fall some day.

Here's a final thought for you. See ya Monday.

Thursday, July 19, 2007

Google-y Eyes

I'm going to make you feel how deeply you want and love me by having a really short post today. I am moving heaven and earth to get this blog moved to a different platform, so I need to focus on that.

I will say, however, that I'm pleased to see the after-hours market slamming the bejesus out of Google (GOOG). As I am typing this, it is down nearly 40 points. Congratulations to you brave put owners out there.

Maybe the bloom's coming off the rose, eh? I mean, it's Google for the love of Jesus.

Did you know I have a Google connection? Yes, it's true. I'm even more interesting than you imagined. The angel investor for my company, Prophet, was none other than Andy Bechtolsheim (Sun's co-founder and Google's first investor). His $100,000 check to them is now worth billions. And, hey, he did all right on Prophet too! Thanks, Andy.

Wednesday, July 18, 2007

Red Rubber Ball

It was an interesting day on the market. Non-amazing earnings from YHOO and INTC, coupled with the continuing problems at Bear Stearns with their hedge funds, took the Dow down about 130 points or so. Looking at the 60 day intraday minute bar graph, I thought that was about all that was going to squeezed out of the market for the day, so I sold all my index puts.

This doesn't always work........back on February 27th, I also sold my puts at what I thought was the bottom, when the Dow was down about 130 - - and it continued to fall hundreds more points.

The only honest-to-goodness bear market right now is anything to do with residential real estate. It's a slow death.

After the close today, IBM reported good earnings, and the after-hours market is up a little. At this point, it's simple a question of whether we shake off the worry and truly blast through 14,000, or if the weakness will get us down to at least that breakout point from last week.

The intraday of the Russell 2000 shows how nicely we swooned and then recovered up to what is a pretty substantial point of resistance. Falling today was easy. Pushing through this resistance area will be tougher.

Much the same can be said of the S&P 500. This longer-term graph shows the small rounded top, the fall, and the recovery.

I'm staying away from the Gold and Silver index ($XAU). I'm not sure what it's going to do next. But it has clearly made the (former) long-lasting channel irrelevant.

Longs might want to consider CCJ. It seems to be bullish and is done with its retracement.

Although residential real estate is getting thrashed, these problems seem to just be starting in the commercial real estate world. Maybe there's an opportunity to short these and enjoy a spill similar to what we're seeing now in residential real estate.

I don't think I'm going to take a position in Union Pacific (UNP), but this is an awfully terrific looking shooting star candlestick.

Tuesday, July 17, 2007

Not Quite........

Today was the big day. Dow 14,000 was crossed (we won't mention that the broader S&P 500 index actually fell on the day). I'm not sure what repelled the market away from this level. Your guess is as good as mine.

Of course, television pundits were completely obsessed with the Big Round Number. If and when we actually close above 14,000, it will be about 3 seconds before someone writes an article entitled, "Next Stop: 15K!" Yawn.

I took a small bearish position on CME today. It seems we have a failed breakout here. Plus, all the elation over BOT is past us now.

Intel is one of the largest and earliest earnings reports for Q2. As of this writing, this stock is down nearly 5%, wiping out about $7 billion in shareholder value. As an aside, YHOO also just reported, and they are down about 2% right now.

I've got puts on NutriSystem, whose stock is finally starting to slip some.

I also augmented by CVX position by buying some XOM puts.

That's it for today. I think some of the snarky comments have me less inspired to write a long, thoughtful post. I've got other things to do.

Monday, July 16, 2007

Any Gas Left?

Dow 14k is in the air, and it's all the pundits seem to want to talk about. I've already mentioned here that my 'upper limit' is 14,100 on the Dow based on its breakout. Even though the Dow was up today to yet another lifetime high, the broader indexes were down, and my overall portfolio climbed by 5%.

When I showed the "mother of all double tops" by way of the S&P 500 graph, many people remarked that the S&P was cheap since profits have doubled on the S&P 500 since the prior high in 2000.

That may be true, but the logic is flawed. That's the equivalent of a Republican declaring the White House could be won in 2008 if only they could find a candidate twice as popular as George Bush. Just because something is double something else doesn't mean the opposite result will take place. If the P/E in 2000 was 500, would a P/E of 250 make it a bargain? Of course, those weren't the real P/Es, but hopefully you can see my point.

The daily chart of the Dow 30 helps illustrate how this market is in the toppermost of the poppermost. I see a fall ahead.

On an intraday basis, it's clear to see how strong the price movement has been since the breakout. I've tinted in the target zone. We have moved through most of the pain already.

A daily chart of the NDX - which I've been avoiding for many months - suggests this graph could be running out of gas too.

My favorite, the Russell 2000, edged down nicely today.

Even though the Gold and Silver index ($XAU) broke above its channel, recently history indicates the RSI has been a reliable bearish indicator; note the areas I've tinted and the subsequent price action.

Akamai (AKAM) looks like a potential bearish play; note the series of lower highs.

ALB also looks nice for a short.

I bought puts on Colgate (CL) today.

I continue to hold onto my CROX puts, which are doing OK.

I also bought puts on CVX this morning. So far, so good.

And I shorted DST (a busy day.....)

I mentioned puts on FXI last week. These look better than ever.

JC Penney has been a favorite of mine recently. My puts on this stock edged higher today due to the stock's weakness.

Friday, July 13, 2007

Is 14K Up Next?

On the whole, it was a great week for the bulls. The Dow, the S&P, the Major Market Index, and a host of others climbed to all-time, never-seen-before high prices. So where does it stop?

The Dow's high on June 1 was about 13,690. Its low on June 8th was about 13,250. That's a 440 point difference, and that's the approximate range of the rectangle out of which it just emerged. By traditional measurement, you take the high of 13,690 and add 440 points and get the target of 14,130. That's 223 points or 1.6% away. It won't take much to get us there.

The Russell pushed into new high territory, but by the slimmest of margins. I'm not sure I would call this a breakout on this particular index yet.

I rarely use arithmetic scale, but I am going to do so here on the S&P 500 to make a point. What I want you to see is the amazing drama that has taken place over the past quarter century, with the S&P exploding to a high in January 2000, collapsing terribly in a bear market, and then flying yet again to the prior high. Is this the mother of all double tops? Only time will tell. Although the bulls that visit this blog certainly would say no.

My puts on Baker Hughes (BHI) did well today. The oil service sector seems like it may be ready to drop a while.

Colgate Palmolive (CL) has tipped its hand by cracking beneath that supporting trendline. It also seems to be in the throes of a triple top. I'm going to buy puts on this Monday morning.

My CROX puts went up some today, as this high-flying stock actually eased a bit in an otherwise very strong market.

Chevron (CVX) printed a terrific shooting star candlestick today.

If you are dying to short (or buy puts) on a Dow stock, you could do worse than IBM.

My puts on Radio Shack (RSH) had a nice day too. It's pretty easy to see why. New highs on the market mean ecstasy without the need for batteries. Demand drops. Sales drop. Battery Club suffers.

Have a good weekend.