Anatomy of a FOREX Trade

In a recent post I mentioned how the New Zealand dollar was an attractive short trade. So today we're going to take a brief break from stocks and examine this trade idea, particularly since it helps illustrate how profitable FX trading can be.

First, let's look at the big picture. This chart spans about six years. The dotted red line indicates what I believe is a very strong resistance level (about .71, which is the ratio of the NZD to the USD). You can also see I've drawn a Fibonacci retracement series on this graph.


Looking at a shorter time frame (and remember, you can click on any graph to get a much bigger version of the image), you can see how NZD/USD marched from a little over .59 to .71 in the second half of last year. That may not seem like much, but in the world of FX trading, it's gigantic. So the basis of my suggestion a little over a week ago was that the tide was starting to turn on this huge move.


On a minute-by-minute basis, you can see how swiftly this currency has moved recently. Keep in mind the move over the past few days represents only a tiny fraction of the entire upward move. It really only went from about .70 to about .69, which on the surface seems like a mere penny.......virtually meaningless. But it isn't, as you shall soon see.


Below is a table of the profits from this trade. Simply stated, the profits were over 100% in just about a week. Not bad, eh? That's how much movement can happen in the highly-leveraged world of FX. Now, as you know, this cuts both ways. This trade could just have easily torpedoed the same amount of capital in just a short a timespan. What was operating in my favor, I believe was the core change in direction that I speculated was taking place when I made my recent post.


So what now? I have stepped aside for the moment and will wait for another opportunity to enter NZD/USD. There are no guarantees the price will bounce up again, but these markets don't tend to go straight up or straight down. They tend to bobble a lot, which is why it's important to have plenty of extra cash in your account in order to absorb the "margin shock" as the prices move. But if it pushes somewhat higher - like to .695 - I'd be happy to get back in and ride the next move down.

Speaking of moves down, just one stock I'd like to mention is NutriSystem (NTRI) which I suggested as a short very recently, on January 22nd. When I first mentioned it, the stock was at $65. In the short time since, it's fallen to $52, and I see in after hours trading it is losing even more ground, trading below $48 as I am typing this. You can imagine how much well-chosen puts would have soared in price based on this suggestion.


I'll see you tomorrow, after the Fed announcement!

Slow Start to a Big Week

This is going to be an action-packed week - earnings, the FOMC announcement, major economic reports. The whole schmear.

There wasn't too much action today, however. The market rushed higher, sold off to negative territory, and closed today with tiny gains. Basically nothing happened. While we wait for something more definitive, let's look at a few interesting charts.

Back on January 4th, the Dow 30 broke beneath a medium-term trendline. I've circled the event here. Notice how the most recent trading has stayed clearly beneath this former trendline.


Backing up in time somewhat, you can see this from a different perspective. I've pointed out in red the day the trendline was snapped, and I've pointed out with a green arrow the reversal off this trendline. As regular readers of this blog know, I am always fascinating by the "turncoat" nature of trendlines. We are now beneath the former supporting line.


If you believe tech is vulnerable, you might consider buying puts on the $MSH. It isn't very heavily traded, but there's plenty of potential downside here on the index (and thus upside on the puts).


The Russell 2000 remains my favorite index on which to buy puts. But we remain trapped in a trading range. If this pushes above $801, all bets are off. In fact, I'd get very skeptical if things even pushed above $796. This is a minute-bar graph:


The S&P 500 is a more popular index venue, although to my way of thinking this is not as vulnerable as the Russell 2000. But you can see trendline behavior similar to what was witnessed above with the Dow.


I haven't been trading the $XAU (gold and silver) for a while, but this index seems to be heading south. Even if it reverses, the recent high price is such an obvious stop-loss level that this is a pretty low-risk trade.


Now a few other short ideas to chew on. Exxon Mobil (XOM):


Chicago Mercantile (CME), which at these price levels easily gains or losses double-digits worth of points on any given day:


BP, which continues to be in the throes of forming a head and shoulders pattern (as yet incomplete).


And, lastly, Bank of America (BAC) seems to be finally falling - - with nice volume too! My puts on this have been inching higher.


My book is coming out in just a few more weeks! Stay tuned!

Stalled Bull

Even the most fervent bull would have to admit at this point that, at least for the immediate moment, things have stalled. The week as a whole was down for the markets, and in spite of a lifetime high on the Dow this week, there's plenty of news and market action out there to scare our bullish friends.

Let me show you something interesting. Below is a chart of the S&P 100 ($OEX) over more than a decade. I have drawn a Fibonacci retracement from the peak in early 2000 to the nadir in October 2002.


Now let's take a closer look at the same index. The 61.8% retracement level was 702.13. And what was the peak this week before it reversed? 699.99. In other words, the market climbed to 99.7% of its anticipated retracement before reversing. Pretty impressive!


The Dow Transports continue to be relatively bearish. I've marked the level they need to crack before we can consider this a new series of "lower highs/lower lows."


Although the S&P 500 pierced its retracement level a while ago, at least it neatly bounced off its trendline.


As I've said repeatedly, this is not a bear market until we break the uptrend. And we have not broken the uptrend! So the bulls still run the show. It is heartening, at least, to see what a monstrous divergence exists between the price action and the RSI.


For more bearish evidence, take a look at the NASDAQ. If you consider this price channel to be meaningful, take a look at the bullish upside (green) and the bearish downside (red). One is a lot bigger than the other, isn't it? I'd say the risk/reward ratio gives the favor to the bears.


Now - as always - some bearish ideas worth examining. Behemoth Microsoft (MSFT):


FCX:


ETR:


Camden Property Trust (CPT):


CKH:


It's been a pretty good week. I'm sure those who follow NutriSystem, mentioned here several times as a bearish idea, enjoyed the drop today.

Thousands of people stop by each day to read this blog, and I want you to know I appreciate it. Doing this blog helps me think more clearly about the markets, and it's fun for me to share my views. Do keep swinging by!

Engulfed

What is with this crazy market? Don't get me wrong; a triple-digit down day on the Dow is terrific. But this market is heading for the nut house.

Over the past trading week, there have been two instances of big bearish engulfing patterns on the $NDX. Today's was a whopper. Having a superstar like EBAY up in the double digits at the open and yet have a wipe-out like this is really encouraging.


The $SPX bounced off that resistance line beautifully. The market still has no direction, though. It's neither bullish nor bearish. Just schizo.


The rest are straight-up short ideas. AMX:


AutoZone (AZO), still in the stratosphere:


Carnival Cruise Lines (CCL), approaching resistance:


Black and Decker (BDK):


Goldman Sachs (GS), finally getting a reversal:


LLL:


NutriSystem (NTRI), with its cup and handle pattern failing:


RTI:


Sears Holding (SHLD), also weakening:


Now for your occasional clip of the day! The world's worst weatherman. Brace yourselves.

It is a Most Elusive Fish...

The markets were very strong today. At least I am not putting my foot in my mouth. I've made it very clear lately that until there's a clear "rupture", we're still in bull-land. Earnings season isn't doing a hell of a lot so far for our cause. It reminds me of a favorite movie clip of mine......



The Dow Jones 30, shown below, hit another lifetime high today. I wouldn't be shocked if we pushed all the way toward 13,000 in the coming weeks. Earnings from EBAY this evening have the stock up over 10%.


The S&P 500, while not at a lifetime high (its high in early 2000 stands unbeaten) is nonetheless at the very highest point of a massive ascending wedge. Looking at the charts tonight, it's obvious that the strength is widespread and devastating to the bears. (Goldman Sachs just being one of countless examples).


The only bearish holdout is the beleaguered Dow Transports. Of course, I'm sure the bulls will say Dow Theory is sad and outmoded and should be ignored.


If there are any living bears still out there, I like the looks of Adobe (ADBE).


...as well as Black and Decker (BDK).


For a bullish play, CRR looks like it is beginning to turn northward after a long slide.


Ryland (RYL) has recovered back to its neckline, although I use that term somewhat loosely since this isn't much of a head and shoulders pattern. All the same, with this much recovery under its belt, it makes going short the stock much less risky.


Much the same logic holds true for Sierra Health (SIE).


Lastly, I will mention one short suggested here, Textron (TXT), seems to be getting slammed in after hours trading. Nice to have one bright spot to anticipate for the morning!

Airport Quickie

This is going to be one of those "at the airport" quickie posts.

Today the market recovered partly from yesterday's sell-off. All eyes are on earnings, naturally. We are, for the zillionth time, in a middleground where it's not clear if the market's going to push higher or lower. Just look at this graph of the Russell 2000 from the past 60 days on a minute by minute basis. Just no clear direction whatever!



ANDE, a long suggestion posted earlier in this space, is continuing to perform well. Breaking above the horizontal line would obviously be a good thing for owners of this stock.


Bank of America (BAC), on which I own puts, announced great earnings today and fell. Good.


Lastly, Health.net (HNT), although not a slam-dunk pattern, seems bearish enough to mention.


For those of you who enjoyed BillyWitchDoctor.com yesterday, I'm glad. For those who had no idea what it was about, I congratulate you on your sanity.

Ultra Chicken

I've been wrong enough to know that I'm not going to start cheering on a bear market. The market was down today. I'm glad. Maybe it'll be down a lot more this week. Which will make me happier still. But until we have a no-doubt-about-it rupture in the uptrend, I'm keeping my furry mouth shut.

The $VIX may have formed a "V" bottom with recent activity, which would obviously be good for both put holders (me) and bears (me again).


I've mentioned AMLN a bunch recently, and it continues to behave like a good little stock (on the short side).


I take pride in being such a pure technician that I know only the ticker symbol - - I don't know the company's name, and I certainly don't know what it does. The symbol is AXR. I shorted it Friday. And today it lost double-digits of points. Nice.


I got burned a couple of weeks back buying puts on superstock AutoZone (AZO). I'm ready for more punishment.


Cigna is a much less volatile stock, but I see a double top here and a stairstep down these Fibonacci levels forthcoming.


Shoe god Nike is another security on which I own puts. It took a nice little stumble today, but I have much bigger ambitions on this one.


I haven't touched NutriSystem in ages, but I'm ready to go back into the water. There's a small head and shoulders pattern here, and this is the kind of fad stock that can succumb to gravity.


RAI is a good short in the world of metals.


...as is RTI......


Sears Holding (SHLD) is another item I've avoided, only because it has the makings of such a sensational cup with handle pattern. But this pattern is starting to look shaky, so I'm OK putting some risk capital into some puts on this one.


Lastly, a bit from one of my favorite cartoons - Aqua Teen Hunger Force. This one is only a little offensive, so you are probably safe clicking the Play button, no matter how far away you live from the coasts of this great nation.

Week's End

There was an interesting article about the GAO's report to Congress about the looming financial catastrophe facing the U.S. This is getting much less attention than it deserves. You can read the original GAO report here. For the Federal Government to issue a report sub-titled "Saving Our Future Requires Tough Choices Today" is surprisingly candid. And you know how adept the government is at tough choices (hint: it isn't).

Here's one graphic from the report, showing how the social security trust fund is going to dip into the red in just ten years. Just look at the deficits grow to $400 billion per year!


It's been a while since I mentioned any FOREX trades, but the New Zealand Dollar (NZD/USD) looks pretty interesting as a short. I'd say if it trades anywhere north of 73 cents, I'm wrong. I've drawn a horizontal line suggesting what seems to be a strong resistance level.


My OIH calls are doing well. All the press about crude oil's plunge in prices in a good contrarian indicator of a short-term bottom.


I mentioned Abbott Labs (ABT) a while back as a promising bullish play. It seems to be going that direction. The strong volume only helps.


Coldwater Creek (CWTR) got hammered today. Trendlines did their magic once again. Chartists were given fair warning recently when prices violated the ascending trendline. Prices pushed higher from there, but then got really ragged around the trendline again.


One new short idea is Martin Marietta (MLM). This appears to be a solid double top. This kind of pattern is nice since the risk is relatively low (e.g. the stop price would be $114).

Deconstructing Barron's Roundtable

Today was a good day. All my portfolios went up. The NASDAQ got clobbered. My AAPL puts went up, since Apple had blow-out earnings and still managed to fall hard. And IBM announced great earnings this evening, only to have its stock get whacked. Having stocks fall on great news makes my day.

But enough about me. Let's make today about the Barron's Roundtable, where a dozen market "experts" talk about - - invariably - - how much higher the market is going to go.

I love Barron's dearly, mainly because it had the good sense to give my start-up (Prophet.net) the "Best of the Web" award four years in a row. But I take issue with their roundtable for a couple of reasons.

One is that they tend to have the same clowns back each year, including the singularly nauseating Abby Joseph Cohen. I don't think the fact she is so physically unattractive to me would grate so much if she weren't so bullish all the time. Oh, by the way, here's the roster:

Art Samberg, Chairman and CEO, Pequot Capital Management, Westport, Conn.;

John Neff, Retired portfolio manager, Vanguard Windsor Fund; managing partner (retired), Wellington Management, West Conshohocken, Pa.;

Marc Faber, Managing director, Marc Faber Ltd., Hong Kong;

Scott Black, Founder and president, Delphi Management; portfolio manager, Delphi Value Fund Boston, Mass.;

Meryl Witmer, General partner, Eagle Capital Partners, N.Y.;

Oscar Schafer, Managing partner, O.S.S. Capital Management, N.Y.;

Archie MacAllaster, Chairman, MacAllaster, Pitfield MacKay, N.Y.;

Felix Zulauf, Founder and president, Zulauf Asset Management, Zug, Switzerland;

Fred Hickey, Editor, The High-Tech Strategist, Nashua, N.H.;

Abby Joseph Cohen, Chief U.S. Investment Strategist, Goldman Sachs, N.Y.;

Mario Gabelli, Chairman, Gamco Investors Inc., Rye, N.Y.;

Bill Gross, Founder and chief investment officer, Pimco, Newport Beach, Calif.

The second thing is that Barron's shows the tables of how the past picks of these experts have fared. That's just fine, except for the fact that for the one or two members who actually have the gonads to offer bearish opinions, their picks are shown as negative values if they do well. In other words, if a short suggestion goes from $100 to $50, the column showing the percentage performance is -50%. I imagine 95% of the readers skim the % column and, seeing the negative numbers, figure the person who made the call it a nit-wit.

The proper thing to do would be to show the true return so that people are comparing apples to apples. This is just example 5,739 of how the world hates bears. They can't even give credit where credit is due.

Oh, there's a third thing I don't like about how Barron's shows this information. They don't even show the average return for the picks! Some people have five picks, others ten, others three.........but they don't bother to show the average return. Is that idiotic, or what? I mean, how is anyone supposed to judge how decent these overpaid people are?

Well, Tim to the rescue. I've punched in the results for the roundtable picks of 2006. And I have - gasp - actually computed the average returns of the picks. They are, in descending order, as follows:

Meryl Witmer: 60.26%
Oscar Schafer: 34.36%
Art Samberg: 30.7%
Scott Black: 28.55%
Marc Faber: 27.86%
Felix Zulauf: 27.38%
Mario Gabelli: 20.16%
Fred Hickey: 18.18%
Abby Joseph Cohen: 17.55% (pfftt..)
Bill Gross: 17.3%
John Neff: -8.6%
Archie MacAllaster: -13.25% (go get 'em, Archie!)

Keep in mind two things. First, these people are, by and large, paid millions and millions of dollars. Second, the market was up about 18% last year. So hottie AJC got paid a bundle for doing.........ummmm..........well, I'm not sure.

I would also add that the results for the roundtable's mid-year picks are also available. Fred Hickey - - just about the only bear in the group - - scores a nearly 20% gain on his picks (and the market went straight up during the second half of last year!) Whereas all three of Abby Joseph Cohen's picks fell in price, averaging a nearly 12% drop. Nice going, Abs. Way to earn your millions!

So there you have it. The experts. The bulls. The unjustly rewarded. How these people can to be in such positions of authority is quite beyond me.

When Great News Doesn't Help

After the market closed today, tech bellwether Apple, Inc. announced not just great earnings, but Oh My God blowout earnings. And how did the market react after hours? Well, both Apple and the NASDAQ fell. GLOBEX is down too. When stocks soften on amazingly great earnings, that's a good sign for us ursine types.

Some indexes pushed to lifetime highs intraday today, but ran out of steam. I do not see any sensational, obvious, the-world-is-coming-to-an-end type pattern. If the market falls, it's going to do so simply because there are no more Greater Fools. As for the S&P 500, shown below, it needs to break below 1,400 before things get interesting.


The Russell 2000 seems to be consolidating right now. I am hoping the current consolidation is similar to the prior one, both of which are shown in light blue highlighting here.


And check out the Transports - aren't trendlines amazing? The prices did a perfect about-face.


My AMLN short - so far, so good. It's down to $40 in after-hours trading. This is a sharp looking graph.


Bear Stearns has had an ungodly amazing run. Again, this isn't a slam-dunk bearish pattern, but more of a "this is stretched to the max" situation. But some maxes can out-max themselves, as we painfully know.


The same logic holds true for Goldman Sachs.


I rarely mention Nvidia, but puts on this stock could benefit greatly from any general downturn in tech stocks, given its huge runup.


Lastly, a suggestion for a buy (or calls)......Oil Services (OIH). My view is that the drop in crude prices has had its run. Take a good look at how strong volume has been recently, in the midst of the stock consolidating in the upper 120s. Stop-loss price on this one would be $125.80, in my opinion.

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.

On Options

Well, it was another wreck of a day for da bears (new high on the Dow, once again), so.......let's talk about something else, shall we? Seriously, one of the most frequent requests I have been getting in the comments section has been to talk a bit about options. So here we go.

Considering the market's behavior lately, let's make this a happy story and focus on a call option. In particular, a call option for a stock I suggested way back in an October 6, 2006 post. The stock was Immucor, symbol BLUD.


At the time, the stock was at about $25. Now let's suppose you had so much faith in this chart that you didn't just want to buy the stock, you wanted to buy the call option (in order to leverage your investment and possibly enjoy great percentage gains).

Well, let's slow down for just a minute and do the most important thing first: figure out a stop-loss price. In other words, figure out at what price we would consider our speculation incorrect. In the case of BLUD, the deepest point of the most recent dip in this chart was at $21.57, about $4 less than its current price. So we decide that if the price ever dips below this level, we will close out our position at once.


Next we have to pick an option - - we'll want a call option, of course, since we're bullish on the stock. I typically look for a number of properties in the option I choose:

• I'd like it to be a little in the money; so in this case, we'd want a $25 call, since the stock is a little over that amount
  
  
• I'd like the expiration to be at least two or three months down the road. If you get the "front month", the time decay will eat you alive. But if you buy an option that's a year down the road, the movement in the stock will have a very dampened effect on the price of the option. So right now it's January, and I'd be looking at Marches or Aprils (at the time of the BLUD suggestion, a January option would have been appropriate).
  
  
• I want to see relatively beefy volume and open interest. It's not easy to find with options (except for huge ones like the S&P 500).
  
  
• I want to see a bid/ask spread that's not big enough to drive a truck through. If an option is bid 5.30, ask 6.50, I'm not interested. Focusing on rule (3) will help get you away from overly fat spreads.
  

So, for instance, here's a chunk of an options screen showing the S&P options; the one I've highlighted is interesting since its volume and open interest stand out above the others, plus, it's in-the-money.


Once the order is placed, I immediately want to get a contingent order placed. This means that if the stock goes above (in the case of a put) or below (in the case of a call) a certain price, a market order will be immediately placed to close that position at the best available price.


Those are pretty much the steps. Once they are in place, one of several things can happen. The stock can move in the direction you anticipated, which will benefit the option even more. Or the stock can move against you, pushing past your stop price, and closing the position at a loss. Or the stock can just meander along, which isn't something you can tolerate for long because the option will expire at some point!


Now let's see the happy ending to this story. BLUD went up about 30% since the suggestion back in October. But the option went up hundreds of percent! That's the beauty of leverage. Now, I admit, this is a fairly idealized example. But the important things to note are: (a) some of the rules to follow (b) the importance of stops (c) the power of leverage, if things go your way!

Shuttering Anon

I've shut off Anonymous comments again. It's not that I'm upset by the put-downs; believe me, I've got a thick skin. But some clown has become so abusive - without anything constructive to say - that I'm demanding a person at least show themselves to make a comment. I've had enough.

Most of the sniping has been about suggestions that didn't work out. That's what stops are for, people! And things aren't going to turn on a dime. Let me give you a specific example.

Almost exactly a month ago, I suggested Conoco (COP) as a short. If you look at the graph I posted, it seemed like it was at the top of a trading range.

I suggested the short when it was at about $71. The stock quickly climbed to $74.89, so yes, you could have laughed and thrown bricks at me for making a stupid suggestion. But after a few days of going up, it started descending, and now it's at $61. A 9% drop in a month really isn't shabby, even though I was "wrong" for the first few trading days. So excuse me if everything doesn't work out perfectly. I've drawn a green rectangle around the "Tim is an idiot" timeframe.


Today's action pushed the Dow to yet another lifetime, never-before-seen high. I took advantage of this to sell into the trading near the top of the day's range. I really like the look of the Russell 2000.


Take a closer look at the $RUT. I've drawn the lower highs and lower lows. Very attractive.


Just a couple of short suggestions tonight. One is AMLN. I can't say for sure that this isn't going to recover more. No promises. But this is a very toppy looking formation.


The other one is Camden Properties (CPT), which also is in recovery mode. I'm selling into the strength of this one.


Good-bye, anonymous posters. I really don't think I'll be letting you in again.

The S&P 1400 Line in the Sand

The most important fact of today's activity is the S&P 500 didn't breach 1400. The horizontal line you see below is substantial. For many weeks, it provided a formidable resistance to prices moving above it. Once clearly pierced, it transformed into support. This barrier is crucial......unless it is cracked soon, hope will fade (for the umpteenth time) for a meaningful drop in the market.


The NASDAQ has been especially strong recently. I'm sure Apple, Inc. (AAPL) can largely be credited for this.


Finally, the Dow Transports remain safely bearish, but if the downward sloping trendline is broken (which would be at about the point the arrow is pointing), that would be really bad for the bears.


Just a couple of stocks to mention today - one short and one long - - and both tech. The short suggestion is gigantic Microsoft (MSFT). Years ago, this stock minted millionares and billionaires. Now it's just a big, fat bore. But its recent rapid ascent makes for a nice shorting opportunity with very low risk, since the stop-loss point is to close.


On the flip side is none other than Sun Microsystems, which has been in the process of either getting blown to pieces of marking time since the turn of the millineum. It finally seems to have done something exciting, and there's no doubt that the burst above the huge area of resistance drawn here is unusual and meaningful.

Ode to Steve Jobs

All the world was abuzz today about the iPhone. This is one gorgeous, sexy, amazing-looking product. Although I've used a PC for years, I bought my first Macintosh early in 1984, and I worked at Apple for a few years. Steve Jobs has been my hero since I was about 14 years old, and the adventures he has had in his business life make Odysseus look like a bore.

Steve Jobs has more style in his pinkie than Bill Gates has in his whole body. And even though the Google founders could buy and sell Steve Jobs many times over, I doubt there's anyone in the country that would opt for lunch with the Google guys over Steve Jobs. He's amazing. As is the press coverage....the top story on CNN!


As well as Fox.....


So it's not surprise that Apple exploded higher today....on volume of over 100 million shares! It wasn't that many years ago that the entire stock market traded 100 million shares. Now just one stock can do it. Just look at this graph!


This is a very late posting, so I'm going to have to tear through it. Boeing (BA) still looks like it's changing trends.


COF, mentioned many times in this space, is moving achingly slowly, but at least it's moving down.


Express Scripts (ESRX), a favorite here, looks terrific. Lower lows and lower highs are clearly intact.


CSX still looks good on the short side.


And FTO is looking like it has a real chance at completing its head and shoulders pattern.


HES is moving nicely lower with all the oil stocks (yep, I got blown out of those OIH calls first thing this morning).


And Hilton (HLT) is obeying the "trendline changing from support to resistance" phenomenon.


Oh, and then there's RIMM. I set my stop too tight on this. It got killed today - obviously because of Apple. I mean, the Blackberry is the most boring piece of crap on the planet compared to the sexy iPhone. Who wants one of those ugly Blackberries now? That's so 2002.


RTI continues to behave as any bearish pick should.


...as does SIE...


...and TSO...


It's late, so I'd better publish this. I hopefully will have more time tomorrow for some general market analysis. Thanks for stopping by!

Grease the Pig

The market tumbled about fifty points earlier today, but it recovered to close up twenty-five on the Dow. I think the bulls are trying to mount a comeback. We will see if the nascent lower highs/lower lows has any legs to it.

One market that intrigues me on the long side is oil (as a short-term play). I think the recent tumble has been fast, and the "common knowledge" that we're in a very warm winter has permeated the media so thoroughly that it strikes me as a contrary indicator. This minute bar graph suggests a possible consolidation, with a stop-loss price on the OIH of 128.94.


The market, as measured by the Dow Jones Composite, seems to be in a trading range, and today we were near the bottom of it. I wouldn't be surprised at all if, by and large, this was an upward-pointing weak.


The Dow Jones 30 has a clearer "lower lows/lower highs" pattern going on, although it's not been that way for long. I've tried to use arrows and circles to simplify the pattern.


The NASDAQ 100 also suggest a medium-sized trend change.


One index I'm eyeing as a short - - although I might let it ride higher for a bit - - is the Russell 2000.


The S&P 500, whose puts I sold early in the day for a nice profit, may have topped out recently. But - you know me! - the guy who predicted 17 of the last 3 bear markets! But even a bull would agree the past couple of weeks have been on the downslope.


Another indication that we may have a bit of an upsurge is that the $VIX is relatively high, based on the activity of the past couple of months. It has typically softened once it reaches these levels, and the market tends to swell higher during that softening.


I've just got three stocks I wanted to point out tonight. Autozone (symbol AZO) looks like a potential double top. I bought puts on this today.


My fascination with Google (GOOG) goes unabated. A petite head and shoulders seems to be intact here.


Finally, MDC, which I have been short a few days, is behaving nicely, moving away from its neckline.


I'll be traveling tomorrow, but hopefully I'll get time to post an update at the airport. Thanks for dropping by!

A Good Start

I have been in Lake Tahoe this week, just like last year, and it's been snowing like mad. Here's a picture I took of - what else? - a bear yesterday, covered with snow (OK, it's a statue, but still). His eyes are totally covered, and he's got sort of a "where the hell am I?" look to him. I can relate.


I enjoy checking out The Kirk Report regularly, and a recent entry showed the fascinating fact that twenty out of twenty sentiment indicators are bearish now. Even I find this amazing. And, believe me, Charles Kirk is no permabear - so you bulls might have a bit of respect for what's been said.

The graph below is one I find troubling. It shows the median value of real estate prices in my part of the country (the initials represent local counties - Santa Clara, Santa Cruz, San Mateo, and Monterey). Now, as you know, I normally love to see a graph that is primed for a fall......this graph, although crude, is pretty obviously a head and shoulders. But I own not one, but two, houses in this area. And it's no secret that housing is in a slump - maybe even a prolonged one. Not good!


Another macro trend (which had everyone in a panic early last summer) is the descent in crude oil prices. When crude was at about $80 per barrel, people were freaking out, and $100 per barrel seemed a foregone conclusion. My view of this market is very bearish. The break below the trendlines you see here is significant.


The NASDAQ exhibits something about trendlines that I've mentioned before, and which I always find fascinating. That is, the act of the trendline changing from support to resistance. Look how the market took its first fall last summer and spent most of 2006's second half climbing back up to kiss the underbelly of the trendline. Now the descent begins anew.


And look how the RSI in the Dow 30 keeps slipping away. The first trading week of 2007 seems off to a great start.


And the Transports have a good chance of cracking the enormously important trendline you see below the current price level.


Lastly, the Dow Utilities got clobbered today.


Now let's look at some short ideas. CBE:


CNX:


COF (mentioned often before):


CPT, a good real estate play:


ETR seems to have peaked out and slipped nicely today:


GS:


OIH may have bottomed out for now, in spite of my bearish view of crude oil. This may see an upward bounce next week.


RIMM worries me, as does Google. This is amazingly strong. Just look at the accompanying volume as well. If it busts above its lifetime high, marked here, I'm going to hang it up for now on this one.


If you've gotten this far, here's your reward......a mash-up of two of my favorite movies: Rudolph the Red Nosed Reindeer......and Full Metal Jacket. Those easily offended, don't even bother clicking the Play button.

Buy Buy!

Two days into 2007, and each of them an up day on the Dow. The bulls are still having their fun. Granted, both days combined don't even equal 20 points. But the bulls are still lovestruck.


OK, that probably woke you up. I hate to be punitive, but no one commented on my gallery of Worst Album Covers yesterday, so I wanted to supplement them.......from the pious.....


...to the romantic....


...to the deepest male emotions.....


....to Ken.....by request. I imagine this is simple a blank vinyl disc.


ABT looks attractive as a buy. This market is really overpriced, I think, but this is still a handsome chart.


HAL, on the other hand, is more symbolic of what's happening. Broken trendlines, weakening stocks, all masked by a strong megacap market


I'm starting to lose faith in GOOG (and RIMM) as shorts. Today was a very strong day on both counts. I've marked by stop-loss price on GOOG here.


DST is sort of fascinating in how it shows trendlines "changing coats" from support to resistance. This kind of thing happens all the time.


BLUD, which I've mentioned many times before as a long, continues to be fantastic. Just look at this strength.


BAC, Bank of America, seems a possible attractive short as it seems to be changing direction here.


QID, the double-inverse NASDAQ ETF, is fascinating in the sense that volume is exploding and the price is finally turning around. Hopefully this is the shape of things to come.


OXY is a good representative of the weakening oil stocks.


Whereas the broad OIH continues to falter. I've been bearish on oil for a few weeks now.


HYDL, mentioned here as a short before, is also enjoying a downdraft.


Although I haven't mentioned HP (the symbol, not the company) in a while, this is a gorgeous example of Fibonacci retracements in action. Magical!


Finally, RTI looks like it may have put in a double top.


See you Friday afternoon......it'll probably be a late posting. It might not even happen until the weekend. But I'll get it done!

Money Shot to Start the New Year

Greetings, my beloved fellow bears.

I introduce this year to you with some of the worst album covers of all time. Just to lighten the mood before we get down to business.





A merciful God has spared us from listening to the contents of the above albums on this blog.

I have so much to say, but honestly, I'm on the world's slowest network. So I'll have to keep it relatively basic tonight.

I rarely read USA Today. It is to journalism what Pamela Anderson is to dramatic acting. But I happened to see its cover story on Ten Reasons the S&P 500 Could Make a New High in 2007.

It was the usually claptrap bulls - - including Abby (ack! cough) Joseph (hack!) Cohen - - like to smear around. I will spare you the list, but the 10th reason they provided: "Because records were meant to be broken." What a bunch of nimrods.

I was delighted, of course, with today's action. We entered this year with the bulls snorting like mad. The GLOBEX was up huge yesterday. Markets around the world soared, including the parabolic Chinese market. And every blessed article on the stock market talked about what a fantastic year 2007 was going to be for the bulls.

So the market shot higher by 130 points. And I gobbled up a ton of S&P puts. Then the market starting sinking. It turned the other direction 170 points, but finally closed the day up 10. All the same, I'm not complaining. Serving up disappointment to the bulls is always a delightful treat, and this is a great way to start the year.


Here's the daily view of the S&P 500. Just take a look at today's range! What a tug-of-war!


I've been promoting the $XAU as a short ever since about $149, and it continues to behave nicely. This is looking better every week.


Now on for the straight charts. I am posting this so late, I don't have time for commentary, but I'll just lay the symbols out for you. BHI...


CERN


FTO, whose head and shoulders continues to form beautifully:


GS:


QQQQ (again, just look at that range, highlighted in light blue):


RYL:


And gargantuan XOM:


I'm sorry for the relatively text-free post. But godspeed to you all, and for crying out loud, keep the comments germane (and non-anonymous, if you're able!)