The Slope of Hope.....with Tim Knight

The Slope of Hope

2007-07-22T16:07:00.000-07:00

Everyone....

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

http://www.SlopeOfHope.com

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.

Home In the Range

2007-07-20T13:27:00.000-07:00

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.

Google-y Eyes

2007-07-19T13:13:00.000-07:00

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.

Red Rubber Ball

2007-07-18T13:03:00.000-07:00

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.

Not Quite........

2007-07-17T13:07:00.000-07:00

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.

Any Gas Left?

2007-07-16T14:59:00.000-07:00

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.

Is 14K Up Next?

2007-07-13T18:24:00.001-07:00

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.

Melt-Up

2007-07-12T19:27:00.000-07:00

Well, it finally happened. We broke out of the consolidation that's been grinding along for six weeks now. The action was just bizarre. I suppose shorts were getting squeezed left and right, and bulls were jumping in with both feet. It was like an orgy of buying.

Based on traditional technical measures, the target for the Dow at this point would be 14,100. I'm not saying it will necessarily get there, but this has been a really clean consolidation, and it seems a sensible conclusion. Particularly given the strong psychological import of the Big Round Number 14,000.

My index-of-choice for puts, $RUT, wasn't as strong as the other indexes, and luckily I was kicked out of my puts the moment the market opened (sparing me most of the day's strength). The high price of 856.39 is awfully close.

Looking at a long-term S&P 500 chart, you can see the index is approaching its lifetime high reached nearly eight years ago.

Now, a moment about the comments section. I totally expected the bulls to rip off their bras and swing them over their heads today - - that's fine, because I would be just as obnoxious if the Dow was down 283 points. There's one particularly poster who doesn't crawl out from under his rock very often, but when he does, his posts are little more than hate and vitriol (he is hiding behind a screen name, but his name is Ryan and he lives in Phoenix). I look forward to being on a new blog platform where I can block sub-humans like this.

In the middle of 1999, Newsweek proved once again the "cultural saturation" rule by having the cover below. The market still had six more months of climbing before it started eroding (not going into full bear mode for another six months after that), but it definitely was a signal of a looming top.

A new best-seller reminds me of the same cultural phenomenon. I actually picked up this book a few days ago and am looking forward to reading it. I guess I'm a frustrated sociologist.

The $VIX has been beaten back into submission again. I'm surprised how cheap puts are these days. I am seeing lots of November puts that are priced no higher than August puts - - - time premium seems to be about zero for some stocks. In most cases, I am seeing in-the-money puts that are barely higher priced than their intrinsic value. So they're basically giving them away.

Apache (APA) is a pretty promising bullish pattern.

And Blockbuster (BBI), which I've mentioned before, also looks bullish.

I think JC Penney (JCP) is at or near its full retracement today. I'm ready to jump into puts on this one again.

There are three stocks that look surprising flaccid given today's action. The first is Baidu (BIDU), which is part of beanie's bombast.

The second is CROX - - I admit, I see the shoes everywhere (ahem - I only wear Eccos, in case you were going to send me some shoes) but I still think it's a fad stock.

And finally, Google (GOOG). For a stock like Google to go up 0.16% on a day like this is pretty lame.

Today's rally was supposedly prompted by strong consumer spending. For a real view of American Consumerism, enjoy this clip from George Carlin - - the portion on consumers starts at the 4:00 minute mark.

Careful What You Wish For!

2007-07-12T09:19:00.001-07:00

A rare intraday post......

I said in my post from late last night that I wish the market would break out of its consolidation and give us some direction. Well - it did - to the upside!

For the Dow Jones at least, there's no doubt about it - this is a clear breakout. I guess this market won't stop going up until every last public company has been acquired and made private. Then we can just shut the equity markets down for good.

NYSE, NASDAQ, GODOT

2007-07-11T20:54:00.000-07:00

Sweet Jesus on a Biscuit......can we please get some direction? Yesterday's 148 point drop on the Dow was encouraging. But follow through? Of course not. We bounce back today by half that amount. Zzzzzzzzzz. Give us as break - literally - through one of those price lines!

Oh, a bit of housekeeping. I've made a couple of cosmetic improvements. First, at the request of a comment made to the previous post, I have reduced the number of posts displayed down from 7 to 3. That will speed up loading time and make for a shorter page to scroll. Second, I've changed the scheme of my charts to what I think is a much cleaner appearance. Let me know what you think. Oh, and in case you've forgotten, click on any chart to see a much bigger version.

Back to charts. The Russell 2000 is in the same boat every other index is - if it breaks beneath a very clearly defined support level, it's time to rock and roll. If it continues to fart around in this range, it's just going to keep boring the pants off of everyone. And if it breaks into new high territory, that's when I climb to the top span of the Golden Gate.

I bought a bunch of puts on the $XAU today based on its price position relative to its well-defined channel. A stop-loss on this would not be expensive, since we're mushed up so high against the channel.

Cardinal Health (CAH), mentioned here numerous times, is on the cusp of a breakdown. But until it goes beneath that neckline, it is a pattern in formation, and nothing more.

I found the puts on Chinese equity-based FXI were fairly heavily traded, so I acquired some today.

I mentioned McGraw Hill (MHP) as a short last month, and it has lost about 15% of its value since then.

Now, as you know, I acquired a couple of iPhones on National Steve Jobs Day, and I made a little video about it. It's a terrific product. There's a ton of wizardy and magic in it, and I'm proud to show it off.

But, Lord almighty, this thing has bugs. Bugs, bugs, bugs! And I'm not even a heavy user. I just checked, and I've used it a total of 9 hours and 36 minutes. That's decent, but it's hardly an exhaustive field test.

In that time I've tripped over a surprising array of really serious issues. Like the fact that the phone outright hangs so hard that I have to reboot it. And the lack of basic editing features, such as double-clicking on a word not selecting that word. Or the inability to insert a cursor within a word (e.g. if you misspell a word, you have to erase the whole frickin' thing and retype it instead of correcting the offending letter).

The worst bug of all is Safari crashing. Which it does. Constantly. So a typical example is like this.......you're cruising along, looking at a web page, scrolling up or down a bit. And then - bam! - it throws you right back to the "home" screen of the iPhone. No big deal, you say, I'll simply go back to Safari (the web browser). Sure, you can do that - - but you're starting at scratch again. The page you were looking at is gone.

This happens to me so constantly that I'm put off on looking at any web content anymore. It isn't just a nuisance. It basically eviscerates one of the principal reasons for having this thing!

Added to which, every time I plug the iPhone into its dock for some juice, this stupid window appears on my desktop, so I have to cancel out of it. Annoying as hell.

Luckily, someone has helped me to release some of my frustration by asking the question: Will It Blend?

Spock Grok

2007-07-10T15:16:00.000-07:00

I was going to write a huge entry today about emotions and the market. But it's already four hours after the close, and I'm still stung with guilt pangs from such a late posting last night, so I'm going to leave my essay for another day.

I will say, though, that I yearn to be like Spock during times like this. The problem with these range-bound markets is that, for a bear, (a) when at the low end of the range, I'm flush with profits, I'm totally committed to my positions, and I'm into way more risk than I should be since I've been doing so well; yet (b) when at the high end of the range, when I'm sacrificed some or all of those aforementioned profits, I'm skittish and risk-averse. Obviously being just the opposite would be helpful on both counts. Spock is a cool customer.

Of course, we're all only human, and markets run completely contrary to human nature. That's why there are a handful of big winners - - those that defy the greed/fear trap - - and the rest of us are just schlubs. Let's face it - emotions and the financial markets are just another example of one of life's bad combinations.

I haven't mentioned China in a while. I'll say this.........long term, I think China is going to be king of the world, or at least a prince. Whereas its neighbor Russia will, in my opinion, collapse back into socialism or communism within the next decade. My optimism for China's long-term prospect's aside, what we're witnessing now is a bubble, pure and simple, driven largely by embarrassing naievete on a greedy yet clueless investing public.

The Dow fell 148 points today. It doesn't mean much until and unless we break 13,250. If we do, I'll probably return to being the arrogant pr*ck you all love so dearly. Until then, my hands remain peacefully clasped on my lap.

The Russell 2000 had an even worse (that is, better) day. My index puts on the $RUT did great.

The S&P is approaching the re-entry point on that channel is busted above a number of weeks ago.

I've stopped buying puts on AutoZone - there's only so much punishment I enjoy - but this stock is really looking toppy.

Ol' beanie has mentioned BIDU so much I might as well put up a chart. My hat is off to any chart that can do this on a day like today.

I added to my Capital One Financial (COF) position.

The DIA puts aren't as clean a deal as the IWM or RUT puts, but they're OK - - decent volume and a 10 cent not-too-terrible bid/ask spread. I did a day trade on these today with good results.

Goldman Sachs (GS) continues to be a put position I believe in.....although the big plunge never seems to happen to AJC's employer.

I've mentioned McKesson (MCK) many times because of its Fibonacci fans. Add to this now an imminent head and shoulders breakdown.

Someone mentioned SHLD in the comments section today.......thanks very much! I've mentioned Sears over and over. It's been inching down. Only today did it really take it in the groin.

VMC is kind of an interesting pattern, inasmuch as it seems to be breaking below a pretty wide consolidation rectangle.

I heard this tune today, and it reminded me of the markets.......to everything there is a season. Bears: I swear it's not too late.

Froth

2007-07-09T20:52:00.000-07:00

How do you address the heartache of repetitious comments? How does one quell hyperbolic, bombastic touting of the same securities over and over? What can you do to temper a mix of English and Spanish comments? Yes, it's....

Sorry for the very late posting tonight. Long story. While up here in the (relative) wilderness, I was struck by this sign:

The Dow, although up, still didn't signal a break yet. We're still in this flag pattern.

Gold has had a very strong past couple of days, but it also is at the upper reaches of a well-established range.

I've been mentioned BEAS as a short for a couple of weeks now. It has a nice, clean stop at $14.20.

Sotheby's (BID), which I've succesfully shorted before, might have a nice double top here.

Honeywell might have registered a triple top. All these "mights" and "maybes" are annoying, I'm sure, but it's never clear until some time has passed. These are calculated risks.

Martin Marietta (MLM) is awfully lofty and seems to be losing its momentum at these heights.

On the bullish side, I mentioned SCHN back on April 14th when the stock was $46. It has had a strong run since then, with a particularly strong surge upward today.

Another old favorite, Taser (TASR) seems to have found its second life. It has run up a bit much for me to be interested now, but a pullback to its breakout would make this an interesting buy.

Prophet North

2007-07-06T21:28:00.000-07:00

Up, then down. Up, then down. In spite of my optimism last Friday, I'm feeling that dealing with the markets these days is a Sisyphean task. We've been range-bound for many weeks, and it looks like we're at the top of that range again. Here's the Russell 2000 on an intraday basis.

Of course the big question......and it only gets bigger every time we find ourselves at the extreme of a range.....is "break or bounce?" As with anything else in the world of charts, the longer a time period that price action is range-bound, the more dramatic the "escape" from that range.

So whereas I was optimistic before when we were near the bottom of the range (emotion check: greed), now I'm concerned we could bounce above this range and get back into full-blown bull mode (emotion check: fear). It's pretty clear that this week will give us the bounce-or-break answer. Here's the S&P 500 on a daily basis, and you can see the consolidation period over the past five weeks or so:

On an intraday basis, this range is very clear to see. Although prices typically take longer to climb than the fall, it seems that within this range, the motion is happening with similar speed. It only took a week from me to change my attitude from "oh, yeah!" to "awww, crap."

I haven't been following gold too closely, but wow, the $XAU chart is really in motion now. It is still in the range shown here, but Friday was a big day for the gold bulls.

Akamai is in an interesting breakdown pattern, albeit at an angle. Worth watching.

Chicago Mercantile (CME) is a good example of why it's important to wait for patterns to complete (I am guilty of ignoring this rule on occasion). As you can see, it was in a tremendously toppy pattern, but then it skittered away from the breakdown point and has done sensationally well since to the upside.

If you do believe the market is ready to head south again, a short position on the DIA or puts on it are a pretty good bet, since both the stock and the options are so liquid.

Micron (MU) is a stock I've mentioned as a bullish idea for the past couple of weeks. It looks better than ever. Just look at Friday's push upward.

I'm sorry this post was late; as I mentioned, I was heading to Lake Tahoe and that took a big bite out of my day. Enjoy your weekend, and I'll see you Monday evening.

The Voice of Optimism

2007-07-05T13:41:00.000-07:00

Everyone knows the old saying: "If you Can't Beat 'em, Join 'em". So I submit myself to the New Normal. I embrace that Things Are Different This Time. I surrender my soul to the wisdom of the bulls. Let us gather hands around the truth together.

Corporate debt is a positive. First, because interest rates are so low, it represents virtually free money for private equity firms to maximize value to shareholders through buyout transactions. Those making access to this debt are trained professionals and are managing the debt load - and its risks - responsibly.

The booming Chinese economy is putting some strain on the environment, yes, but the Chinese have learned from the lessons learned in the British and American industrial revolutions and have taken the steps necessary to protect their environment for the sake of those that consume their products, for the sake of the economy in the long term, and for the sake of future generations.

The manic building in Dubai, Shanghai, and other emerging economies is exhilarating, and the race to see who can wind up with the world's tallest building just adds to the fun. The building boom is not overdone. On the contrary, Dubai - - until recently, a sweltering, barren desert - will become the top tourist attraction on the planet. The strength of the oil economy will allow this entire region to blossom for decades to come as the new epicenter of global capitalism and prosperity.

The housing "bust" is completely overblown. Yes, there are some isolated instances of damage from the sub-prime lending debacle, but it is completely contained. Although the red-hot pace of housing gains from years past will rest steady for a while, there is in fact no housing "bust", and thus no aftereffects to the economy at large.

The fact that the savings rate has dropped into negative territory is simply illustrative of strong consumer spending. We live in an age of rapid change, and adapting and embracing that change takes money. Here in the United States, we are simply helping lead the way by taking part in an exciting new time of electronic and communications wizardry.

The U.S. equity markets are not overpriced. Indeed, as the private equity buyouts of late illustrate, stocks in the U.S. are undervalued.

By the same token, the Chinese stock market offers a store of value that will only continue to rise. A value of 8,000 on the Shanghai index seems almost a foregone conclusion, particularly since the number "8" is widely considered to be lucky in China.

Some many say that the tremendous push of wealth to the highest echelons of society will create social unrest and turmoil. "Some" are wrong. There are about 1,000 billionaires in the world today (up from zero in 1915), controlling nearly $3 trillion in wealth. The couple of billion people in the world that live in poverty will view these billionaires as inspirational.

There's plenty more good news in the world. The Blackstone IPO was not an opportunistic event meant to exploit the naivete of investors buying at the top of a market. It was simply a means by which the principals in the organization could tap into some of the value they had built while at the same time providing a means for the common man to participate in this exciting new investment vehicle.

The entire "terrorism" issue is completely overblown. Once the war in Iraq withers away to a close, terrorism will be a smattering of unrelated incidents that no longer affect the Homeland.

We have outgrown inflation, and it has about as much chance of returning as the fads of the 1970s that accompanied it. Food and energy are notoriously volatile components, so if we strip away the ability to feed and transport ourselves, the core inflation numbers are comforting.

Next year, when a Democrat is virtually guaranteed to win the Presidency, the combination of a left-leaning Congress and President will be just the kind of "one-two punch" the economy needs to really kick into high gear. Taxes will be reduced or at least be kept low. And the entirely Democrat federal government will provide business all the assistance it requires to continue to thrive.

And, just to put a cherry on top of the whole thing, watch this:

I am now cleansed. And I no longer have to bother with this bearish claptrap. I've had enough.

The Range

2007-07-03T10:14:00.000-07:00

OK, let me get this out of the way: I was wrong about Apple. Back on June 11th, I proposed that the hype around the iPhone would be a precursor to the stock getting walloped. Well, on the first trading day after the iPhone's introduction (yesterday), the stock did indeed inch down (and on a 126 point up day on the Dow, no less).

But it reached a new record high today. And, looking at the chart, there is no technical reason for the stock to be weak. So I sold my puts at a (relatively modest) loss this morning, and shame on me for ever doubting the power of Steve Jobs, my lifelong hero.

Phew. OK, done with the self-flagellation. Today's entry will be very short, since I imagine most of you are already wrapped up in July 4th festivities. As I mentioned yesterday, it looks like the readers of this blog were correct in suggesting very bullish behavior just prior to the Independence Day holiday.

One thing is clear, though. Over the past five weeks, the markets have been bouncing around in a clearly-defined range, ending (temporarily, at least) the unabashed push upward preceding June.

Zooming in a bit on the Russell 2000, the range has actually had two stages, demarcated here with two different colors of highlight. The most recent range is more volatile, yet it has a higher base.

This becomes even more obvious when you look at the $VIX. The range between highs and lows on the $VIX has exploded higher since June 1st. It makes for some extremely jumpy trading, since bulls and bears are struggling more than ever for control.

As for my broad view of the market.......it's pretty simple. I chalk up July 2 and 3 to the aforementioned Independence Day strength. I would expect to see some meaningful weakness for the balance of the week. If that doesn't take place - - and certainly if we push above the range that I've illustrated - - it looks like the bulls will take back the control which they set aside as of June 1st.

The 7/4 Push

2007-07-02T13:11:00.000-07:00

A number of readers have been remarking how strong the market is prior to the July 4 holiday, and how bears should sell into this strength as opposed to shorting too early (like last week). If today is an indication, it seems that was good advice. The market was strong across the board, with the Dow posting a better than 125 point gain.

My index-puts-of-choice are for the Russell 2000. I've got a pretty big put position on this index. As long as the series of lower highs and lower lows stays intact, I'm fine with this.

Remember, tomorrow is an abbreviated trading session (the equities market closes at 1:00 EST, three hours earlier than normal), so it's bound to be a quiet, low-volume today. I would think most of the pre-July 4 fireworks got taken care of today, but there might be another little push upward. The S&P 500 is also in a "lower highs" pattern, and it needs to remain so in order for the short-term bearish picture to remain decent.

One nice Dow stock for puts is Alcoa (symbol AA) which looks to be in the latter stages of a head and shoulders formation.

For big believers in the continuing ascension of energy prices, APA looks like a good bullish play. This is a really nice saucer breakout.

PSB is a short I closed a little while ago with a nice profit, but I re-entered it today, since it seems to have finished with its retracement.

The Lonesome Tale of Burrell Smith

2007-07-01T20:44:00.000-07:00

This will be my last "introduction of the iPhone" post. Promise.

I have been mixed up with computers since 1979 and have religiously followed the characters of the Silicon Valley since 1982. I know the history of Apple particularly well, especially around the creation of the Macintosh. Thus, I've become acquainted with the stories of the players in that story.

Let me introduce you to three players in particular, numbered below. 1 is Andy Hertzfeld, one of the software geniuses on the original team (He works at Google now). 2 is Bill Atkinson, another of the software geniuses (he invented Hypercard, created the original MacPaint program, started General Magic, and is now an acclaimed photographer). And 3 is Burrell Smith, considered the hardware genius behind the product.

Here's another photo of them, taken on the day the Macintosh was unveiled. You can see how exuberant they look. Notice another circled face, that of Apple co-founder Steve Jobs.

Nearly a quarter of a century has passed since those photos were taken (incredibly...) So fast-forward to the present.....well, last Friday, when I was hanging around the Palo Alto Apple store. And look who wanders in......none other than Steve Jobs!

Now, you've got to recognize what a big deal this is. It's iPhone day. And this store is the epicenter of techies and geek-freaks. And Steve Jobs shows up. It would be like having a unveiling of a major new edition of the Bible and God beams down for a visit. You can imagine the reaction. So in this clip you see him checking out the store and deciding to go back across the street to grab his wife and bring her in too.

And once they are in the store, Jobs immediately sees the aforementioned Andy Hertzfeld (who, 30 seconds into the clip, you can hear saying "Bill stayed here all night", referring to Atkinson) and, at 1:00 into the clip, you can see Jobs amble over to Atkinson to chat with him a while. So it's like a micro-reunion.

So where was Burrell? That, to me, is kind of the sad part.

My understanding is that after the Macintosh-crazed 80s, he ran into some issues. Suffice it to say that I see him on the street at least a couple of times a month. He has a very long beard, partly grey. He walks at a quick pace, but looking at the sidewalk the entire time. And, to a random stranger, he might even look like a homeless guy (although I'm pretty sure he's living comfortably and likes to make regular jaunts to Whole Foods to get out and about).

What's striking to me is that most people would really assume he's just another homeless guy, without realizing what a major figure this person was in computers - and the Mac in particular - today. And his absence from all the excitement in the video above just reminded me of the juxtaposition. Because as the accidental reunion was taking place, their missing member was probably alone, walking to the grocery store, stare affixed to the sidewalk, destined to pick up another quart of milk.

Are the Bulls Losing Their Grip?

2007-06-29T15:38:00.000-07:00

Dedicated bulls should worry about this: the market is starting to make sense to me. Last week was a really good week. This week was a really good week.

Now, if we were at the tail end of a two-year long bear market, it would be easy to shrug this off. "Oh, yeah, Tim the permabear has been doing well because everything has been falling non-stop." But you know that's not the case. The Dow was at its highest level in human history earlier this month, and it still has over 98% of that value. So I've been able to score big profits trading virtually entirely bearish positions in a market which has been in anything but a free-fall.

So it's making sense. Leading up to this month, I was starting to lose my mind with how nonsensical, bizarre, and random the market seemed to be. It would be like living in a town where cars stop at green lights 80% of the time, pedestrians occasionally walked along the middle of the highway, and baby carriages were parked on the roofs of buildings. After a while, you start to lose your mind in that kind of environment and question your own sanity.

But the town I live in suddenly makes sense. People stop at red lights and go on green. Baby carriages are safe. And pedestrians remain on the sidewalks. And the market goes up when I think it's going to go up. And it goes down when I think it's going to go down. It's a nice change. Let's keep those buggies off the roofs for a while, shall we?

If you read my post from earlier today, you know I spent a little time this morning at the Palo Alto Apple store watching the crowds line up for the ~~JesusPhone~~ iPhone. If you didn't see the post earlier, check it out. It's got a cool little video I made.

I'm trading the Russell 2000 options actively, both intraday and on swing trades. A tight stop on the IWM ETF is at 84.19 right now, which was the high for both Thursday and Friday.

There's really no good instrument for trading the MidCap 400 ($MID), but it's a fascinating graph to me. The markets seem to be revving up to be in swoon mode.

I haven't traded the NASDAQ (either index or hardly any stocks) for a while. It's been relatively defiant of the recent weakness in the market. But I have a feeling this group is going to start joining the downdraft party.

Side note, now that I mention NASDAQ - congratulations to RIMM owners, particularly call owners. I see some of the calls were up literally quadruple-digit percent levels today!)

Oil services are looking terrific for shorts/puts. HES is particularly well-formed and liquid.

McKesson (MCK) is another beautiful stock. One of the best examples of exploiting Fibonacci fans that I've ever seen.

RadioShack (RSH) has been on an enormous upswing of late. (Rumor has it that AJC has joined the Battery Club multiple times to keep her bedside electronic accouterments fully-powered, thus the earnings spike). But - - just like JC Penney is JC Penney - - Radio Shack is Radio Shack. And that's all you need to know. I've got puts.

Next week should be relatively quiet with a big fat holiday right in the middle of it. Have a safe one (most of you, at least), and I'll see you on Monday.

Late breaking news! I was there for the Big Event (the 6:00 opening of the doors at the Apple store). It was a madhouse. Police, news crews, and hundreds of people (half of which were taking pictures).

You know the funny part? People waiting three days to be near the front of the line. And one hour later....one hour......I was able to just walk right in through the front door without a wait. Great use of three days (and nights), fellers. Anyway, here are my two iPhones perched on the kitchen bar:

The JesusPhone Arrives

2007-06-29T11:13:00.001-07:00

Today must be Steve Jobs Day, since both the iPhone and Ratatouille make their introductions. That can't be an accident.

I've never done this before, but here's a Slope of Hope Original Video for you that I just put together. Enjoy:

Once More into the Breach

2007-06-28T13:55:00.001-07:00

Well, I'm glad we got that bit of business out of the way!

The stock market did its usual spastic freak-out the moment the Federal Reserve Statement was issued. First it lurched down. And then up, big time. And then down again. And it spent the rest of the day generally heading south. It wasn't a plunge, by any stretch, but it certainly nuked a very healthy rise in equities into oblivion.

Looking at the candlestick chart of the IWM (which is the ETF for the Russell 2000), you can see a picture-perfect shooting star. My feeling is that tomorrow will be a down day, and we can get back to the business of shorting this market.

Colgate (CL) is a relatively stable/"no surprises" stock that might be worth acquiring puts against.

Coventry Health (CVH) appears to have failed to break out of a normally bullish pattern, which is bearish. I'm short the stock.

I've mentioned Jet Blue (JBLU) for the bulls out there. I stand by this position. Maybe this former high-flier is getting its act together after many embarrassing fumbles.

I bought puts on MCK today based on a small head and shoulders pattern plus a falling-away from a Fibonacci fan.

Oils are looking pretty good for put/short opportunities too. I bought puts on OXY just before today's close.

Same story with Southern Copper (PCU).

Potash puts are fairly heavily traded, thus the bid/ask spread isn't atrocious. I picked up some of these today (as with all the other trades, well after the Fed craziness).

...and the same for Schlumberger (SLB).

.....and Exxon (XOM).

I stopped trading Research in Motion (RIMM) ages ago, since the stock is just too weird for me to understand. Congratulations to those long the stock (and, even moreso, long the calls). RIMM had oh-my-God earnings after the close today and, last time I checked, was up 12%. Poor old Fred Hickey can't seem to live this one down.

Lying in Wait

2007-06-27T13:20:00.000-07:00

If you read yesterday's post, today's action would have come as no surprise at all. Luckily, I sold my puts promptly shortly after the opening this morning. I wasn't slick enough to buy calls - and shame on me for not doing so - but I'm at least glad to have exited. In the meantime, here's a live Webcam of me waiting for the push upward to exhaust itself.

The Bank for International Settlements (BIS) - a widely respected organization - recently issued a report citing the distinct possibility of not just a recession, but a worldwide economic depression. Here's a snippet from an article about the report:

The BIS, the ultimate bank of central bankers, pointed to a confluence a worrying signs, citing mass issuance of new-fangled credit instruments, soaring levels of household debt, extreme appetite for risk shown by investors, and entrenched imbalances in the world currency system.

This isn't some weird crackpot organization (or a crackpot blog writer). This is a fairly sober group of individuals. Take note.

The $VIX, as expected, absolutely plunged today. I'm not sure - no one is - what the market's reaction to tomorrow's forthcoming GDP report and Fed Announcement is going to be - - but it's possible that all the excess in the $VIX got squeezed out today. For myself, I think I'm going to keep most of the powder dry until well after the Fed announcement, which always throws the market into a bizarre spasm.

I've tried to emphasize in the chart below the pivot points of the Russell 2000. Just to be clear, the fact that today's is circled doesn't necessarily mean I think the buying is over. But it's a help visual aid in any case.

As you probably know by now, the Russell is my favorite index for option purchases. It was especially strong today. At this point, I'd say 840.02 is a good stop-loss level.

The S&P 500 also had a good day for the bulls. I've drawn the downward-sloping pennant that I believe is confining the market action these days.

Now it just wouldn't feel right if I didn't offer my JCP chart of the day. One reader commented I should get out of those puts. Well, earlier today, I did. I don't think the fall has exhausted itself, but I'd rather take profits now and re-enter the puts after a retracement. If this stock pushes its way back to the neckline, I'm going in big-time again.

I'm long Micron (MU) now. It won't be a long-term hold, I don't think. But this is a nice little bullish chart for now.

Let's enjoy a little George. See you tomorrow.

When It Seems Easy, Feel Queasy...

2007-06-26T13:59:00.000-07:00

I began this blog over two years ago, and I think that it has made me a better trader. Having to step up to the podium each day and offer up opinions (which are subject to scrutiny, disparagement, and future review) makes me think long and hard about the market. And the occasional public floggings I have received have imbued with me a healthy dose of humility that I think is essential to profitable trading.

Trading profitably has become far too easy recently for my liking. If bearish trades start becoming like shooting fish in a barrel, I know it's time to take profits. There have been times in the past.......and this is very common among traders.... when easy profits encourage more trading. And the tide starts to turn against you. So you pile on more. And the losses start to pile on. And, before you know it, all your fantastic profits from the last downturn are M.I.A. I really don't want to go through that again.

So as the trading day ended, I was kicking myself for having such a substantial position of puts on the Russell 2000 in place. There are some areas in my life where "irresponsibly large" is welcome, but options positions is not one of them. Let's just say I hope I don't wake up to a huge gap-up in the indexes. It could happen.

The basis for my nervousness.......besides my own angst........is the $VIX. Just take a look as this multi-year graph. For ease of viewing, I have circled peaks and troughs. We have certainly had $VIX levels higher than the present one, but let's face it, this is pretty peak-y. As I said: I'm nervous.

The Russell 2000 is below its supporting trendline, but this trendline isn't horribly significant. In other words, I don't put a heck of a lot of weight into the fact that it is broken. I'm glad it's broken, to be sure, but there's still a fair amount of support at these price levels.

One way to look at the market is that, for the past month or so, we've been caught in a trading range, and we are at the bottom of that range now. I've highlighted the range area on the S&P 500 daily graph here. I do not think we would break into new highs from here, but we might wind up with a triple top or at least partially retrace our way back up near the former highs.

One could look at the market another way........it is pretty easy to lay out a massive rounding top. Just look at the intraday chart of the S&P 500, where I've embellished it with probably one of the worst arcs drawn in human history. (I am not much of an artist).

Returning to the $VIX, however, the zoom upward has been swift. And if the market settles down and starts marching upward again, the premium values built into options are going to shrivel up faster than Strom Thurmond's johnson on a chilly southern evening.

OK, a few stocks. Stocks like CROX! I have, as I've mentioned before, lost some cash on buying CROX puts before. Fool that I am, I gave it another go today. My puts are slightly profitable. I was inspired by an article this week in Barron's. They say that easily 20% of this stock's value could be blown away just by right-sizing it to its industry. Plus, I think it's a fad.

One similar shoe fad which is already "post-bust" is Heelys (HLYS), those obnoxious shoes that kids wear with the wheel on the heel. As you can see, the stock is doing poorly.

I hate to mention JC Penney every day, but this continues to do beautifully. I've highlighted my price target. The puts I bought on this are up huge.

Vulcan Materials (VMC) has a plainly defined range which seems to be breaking down. I'm short this, and it's got a nice ways to fall to the trendline.

Oh, Baby...........

2007-06-25T14:19:00.001-07:00

I'm feeling a terrific sense of control over this market (at last). Recently, I've been doing extremely well. Even with intraday trading, I'll buy calls at just about the bottom, sell them at just about the top, then buy puts, and then ride those all the way down. I'm rarely this "in synch" with the market, but it's been a good feeling.

I noticed that Barron's this week features Blackstone's CEO on the cover, pointing out that a massive public offering of the largest private equity partnership clearly signals the peak of these beasts. I couldn't agree more. Oh, let's check in to see how the public's investment in the two-day old Blackstone has been faring.......

Of course, the big news today is that today's bounce from last week's downside action completely evaporated. The Dow surged 120 points higher (and I profitably closed out some calls I bought earlier in the day, then gobbled up a huge number of puts), then the entire gain by blown to smithereens. As you can see from the Russell, the medium-term trendline is now broken.

About half an hour before the close, I sold all my puts (DIA and $RUT), since I felt the selling was - - at least very short term - - overdone. Here's the S&P 500.....

In a broad sense, I think things have changed. It's been horrible awaiting the change, but I think it is finally here. In the broadest view, I think we have witnessed the passing of the Mother of All Double Tops.

This is not to say I'm speculating on outright collapse from here. On the contrary, I think we're probably due for another bounce up. But - as with today's - I may well decide that the bounce has exhausted itself just a couple of hours into a single trading day. My portfolios are devoid of any index positions right now, and consist of carefully-selected equity shorts, equity puts, and a couple of longs (DXD and BBI).

If you're just dying for a bullish stock, AutoDesk (ADSK) looks interesting:

Real estate has been in a freefall for months. I was thinking it would stabilize. But we might be in for some more downside action. Apartment Investments (AIV) has an impressive head and shoulders pattern.

My short in BEAS had a good day. I've put the clearly defined support and resistance horizontal lines here.

Bear Stearns was the "culprit" behind today's fall. I've been mentioning this as a short (or put purchase) for a long time. You can plainly see how, after its fall from its ultimate high, it tried to retrace........but the jig is up, and it's been falling ever since.

Looking at a broader chart, you can see a major, major supporting trendline has been shattered.

Goldman Sachs - employer of the hottie pictured at the top of today's entry - is suffering as well, although not to the same degree. My puts in this are up, and there's plenty of downside left on the stock, tinted here.

Another set of puts that's doing great is JC Penney (JCP). I've illustrated a potential target. Thank you, polyester! Thank you, leisure suits! Thank you, lawnmower care supplies!

Massey (MEE) is sporting a monstrous, gorgeous head and shoulders, and I think the retracement is complete now.

A bunch of people have written me asking to explain some options trading basics. I'll do it on a quieter day when the market is up half a point or something. I've had enough. I'm going for a swim........

Ratatouille

2007-06-25T07:19:00.001-07:00

Just a very quick early morning post to say that I've closed out all my index puts and have (on a smaller scale) gone long indexes for the time being. I think a bounce is in store, although whether the bounce lasts only an hour or two today or for a number of days in a row remains to be seen. ~~Suffice it to say I'm pulling in my bear paws on indexes, although carefully-selected bearish stock positions remain in place with good stops.~~ (Update: I actually 20 RUZ-GD at $25, sold them at $27.50 about an hour later, and went heavily short.......)

I have the good fortune of being related to an employee of Pixar, and as such, I get to see (with my family) their films in advance. Yesterday we went to the Pixar theatre and got to see Ratatouille.

Believe me, it is their best yet. Even better than The Incredibles. If PIXR was still public (as opposed to being part of DIS), I'd say buy it. Even if you don't have kids, it's a fantastic film.

And thus ends today's movies section!

Poetry in Motion

2007-06-22T15:38:00.000-07:00

I've got a riddle for you.

What well-known Jewish personality made a bundle of money on Wall Street today and needs to have their back hair waxed? If your answer is Abby Joseph Cohen, you are technically correct, but the answer I was seeking was Stephen A. Schwarzman of Blackstone.

OK, here's the second part of the riddle (isn't this fun, kids?)

What percentage of public investors have profits on newly-minted Blackstone Group (BX) today, now that the trading day is through? The answer: basically zero. Oh, I'm not talking about the midget founder of the place. He's doing just fine with his billions, thanks for asking.

I'm talking about the poor schlubs who thought they could get inside the club by buying into this stock. Virtually every single share bought is in a losing position. Nice going, folks.

Yesterday, if you'll recall, I wrote:

But tomorrow is - at last - the big day. That's right - it's Blackstone day. Apparently the demand for shares in BX is about seven-fold oversubscribed. Nothing would be more poetic than the market taking a fall tomorrow.

Well. Down 189 more points. Nice.

I actually had a great day, making money both on the short side and - for the brief bounce of the day - on the long as well. I remain cautious and humble in the face of a massively moronic and gullible public that could be coaxed into buying again. Thus I tighten my stops every day.

The Russell has been stronger (relatively) than I'd like to see. But it remains attractive to me largely due to its reasonable bid/ask spread on the options. I remain dumbfounded at the complete rip-off represented by the S&P 500 options market. It's just criminal.

Oh, speaking of the S&P - - - in spite of the recent fall in equities, we remain absolutely sky-high. Dare I even say grotesquely overvalued. Oh, well. It'll take years to sort out. Long story short, don't be fooled with the tiny inching down we've been doing. It's nothing compared to the radical overvaluation still present. Trillions of dollars of equity need to be destroyed before we are at interesting values again. Whether the top has passed it totally unknown. And it doesn't matter to me, as long as I manage and maintain these stops responsibly.

Symbol ALB bounced up to a perfect retracement, thus permitting me to re-enter the position which I closed profitably just a couple of days ago.

Symbol CAH isn't doing badly for me either. I own puts on this.

Although Cigna (CI) is too big to simply collapse, it's got a cute little H and S pattern whose neckline was broken today.

A new short I think I'll enter next week is - again - Malaysia (EWM).

I've got to hand it to Google (on which I have not had a position in a while) - - they seem to be doing everything right. This is a gorgeous bullish pattern - just beautiful - particularly in light of today's market action. Poor old Yahoo is just a mess. Why anyone ever used Yahoo in the first place - - I thought they sucked in 1996 when I first tried them - - is beyond me.

Goldman Sachs (GS) suffered some today, so my puts prospered. This isn't a big fall by any stretch. I guess maybe the lame-o BX reaction hurt them? I don't know.

I continue to hold my JC Penney (JCP) puts, which push a little higher into the green each day. This is a dynamite pattern. Never has polyester clothing been so good to me!

I haven't shown Meritage (MTH) in a long time, but I just want to use this to illustrate the kind of slow grinding death equities can go through. I think this is a good proxy for just about the entire stock market, although housing got a head start on the rest of us.

It's been a good week. Particularly since the detractors are too sheepish to show their faces around here during down days. So let's celebrate:

Yeah, We Do.........

2007-06-21T14:26:00.000-07:00

I've been mixed up with computers a long time - - since 1979, actually. And I've been involved in electronic communities since 1981. Yes, you read right. I've been doing this a while. And I've learned a few things along the way.

One thing I've learned is that there tends to be an inverse correlation between how a person presents themselves (when they can hide behind a facade) and how they really are. This applies particularly to personal appearance. A shining example of this appeared in last Sunday's New York Times, which profiled a number of serious electronic gamers with their avatars. Here's a particularly painful, poignant example:

So the enormous mass of protoplasm on the left is the human. And the svelte, strong, serious warrior on the right is his representation of himself in the virtual world of Everquest.

Now, if you read this blog at all regularly, you really have no reason not to do the free sign-up for BlogLog, since it's a kick to see who your fellow readers are (savvy, witty folks, by and large; with at least enough good sense to swing by here once a day). But I am highly confident that no one reading my blog looks like this.

My caution yesterday was very well founded. In fact, it was spot-on. The market opened. It farted around a bit, then it fell hard. And I closed out my DIA and RUT puts at huge profits.

Then I bought calls. But........because I'm an idiot......I sold them shortly thereafter for breakeven. Then they spent the day going up 20%, so that was about $8,000 down the toilet. Like I said: an idiot.

But tomorrow is - at last - the big day. That's right - it's Blackstone day. Apparently the demand for shares in BX is about seven-fold oversubscribed. Nothing would be more poetic than the market taking a fall tomorrow. As for BX, I guess it's almost certainly going to close well above its offering price. I guess. But there's something about this offering that I think is rather pivotal in the world of investor psychology.

Anyhoo, my intuition is that tomorrow is that we're going to resume the fall. Perhaps even taking out Wednesday's lows.

One of my favorite real estate shorts now is Kilroy (KRC). If this stock can break its neckline, this is a honey of a pattern. Quite large.

If the market is on the weak side after the opening bell tomorrow, I think some 3M (MMM) puts are probably one of the best places to take advantage of any downside action.

I've mentioned Micron (MU) as a long a number of times. This is a great little pattern, with a volume swell to boot.

It's been quite a week. Let's see how Blackstone day treats us. See you after the close. Oh, and this is me. For real.

Do We HAVE to Have a Bounce?

2007-06-20T17:30:00.000-07:00

I started the day off, before the opening bell, feeling very discouraged. The market seemed inclined to stay at - to borrow from Irving Fisher - a "permanently high plateau". Today provided a welcome respite, with interest rates gutting the Dow for 146 points.

But surely you've seen a change in my temperment. Whereas typically I would be tooting the celebratory horns at such a thing, all I can think now is, "Great, we'll just go into another bounce now." And, perhaps, in my own twisted way, that's actually a really bearish sign. Because when I was feeling balls-out, it's the end of the world, the market invariably pushed higher. I regard these recent jolts downward not with glee, but with dire suspicion, bordering on a sense of dread.

Not to say that, from a chartist's viewpoint, the indexes (and carefully chosen stocks) don't look terrific for the bears. The S&P 500 looks gorgeous.

And yet, as I look at the minute bars of the same index over the past 60 days, unless the lows of last Thursday, June 7th, are taken out we're going to continue to stay stuck in this f*cking grind upward. If there is, in fact, a loving God, and we blow out the lows of June 7th, then it's time to rock. But I'm a doubter until it happens.

Another reason for my skepticism is that whenever the VIX goes rip-roaring higher, it is prone to ease back down (lately, at least). You can see the general range I've highlighted below. We're a bit above it.

Apple (AAPL), on which I own a small put position, edged down both yesterday and today. Next Friday is when the JesusPhone gets introduced. Obviously it will be fascinating on the 29th to see what happens to the stock. To say this product is widely anticipated is a gross understatement.

Let me pause for a second to make a socionomic observation. I saw a full page ad in the WSJ this morning for a series on CNBC (of course) called American Greed. Just another sign of the apocalypse, folks. The world's vomit-inducing obsession with cash, stoked terribly over the past few years, is reaching the saturation point. Barf.

Real estate stocks are a strange one to me now. They have very toppy formations. But they have also fallen far enough to be resting on some pretty significant trendlines. It is a difficult call. Apartment Investments (AIV) is a good example. I don't have a position in this one, although I do in some others, such as ESS.

Bolt Tech (BTJ) finally started to fall a bit today, although it would be hard for any stock not to do so on a day like this. I have great hopes for this one.

CVH doesn't have any particular bearish pattern per se, but it does look like what would normally be a really bullish breakout is going limp-dicked. And that's bearish. Oh, random thought: if you ever see anyone spell it per say, shoot them. Because they are an abomination to the gene pool. Aw, hell, let them live. Most people are idiots anyway. No harm in letting a few more loose.

I'm sorry to say I got stopped out of John Deere this morning, but it went on to form a lovely shooting star. Sigh. Could have to re-enter this sucker.

InfoSys (INFY) isn't my favorite pattern in the world, but as lower lows and lower highs go, it's not terrible.

Lehman Brothers (LEH) is mushed up against its Fib Fan. Nice.

My bullish notes on ONT have panned out OK, but, I dunno, I'd edge away from this one unless it busts through yesterday's high. Volume is slipping fast. And if you look at the entire history of this stock, it definitely is not beneath wrecking a perfectly good bullish pattern by going limp.

The SPY (whose options have a surprisingly sucky bid/ask spread) sports a nice bearish engulfing pattern. Heavenly Father, would you please make the market fall hard for more than one day in a row? Please?

Remember: it's a beautiful world.

The Show Must Go On

2007-06-19T14:17:00.000-07:00

It was another relatively uninspiring day on the markets......but I dare not let a post go stale! So, as always, at least a few thoughts.

Akamai (AKAM) is a peculiarly slanted head and shoulders pattern which inched lower today, in spite of some general market strength.

Albemarle (ALB).....and, good technician that I am, I have no clue what they do.... continues to fall nicely. There is really very little in the way of support on this stock, so I'll just keep tightening up my stocks.

Just to show again I am not a bear a bear only, I've got a couple of bullish ideas. One of them is Blockbuster (BBI) which is trying......apparently with some success....to change their business model in the age of Netflix and Apple TV.

Another bullish idea - well, kinda - is DXD, which is a double inverse ETF based on the Dow 30. It's incredible how popular these things have become. Just look at that volume.

A bullish idea I've mentioned before which is moving in the right direction is JetBlue (JBLU).

My crusty old short in Sears Holding (SHLD) is ever-so-slowly moving downward. It finally edged beneath the support line you see drawn here.

I'll see you here tomorrow.

Post Number D

2007-06-18T13:26:00.000-07:00

Well, this is it.......my 500th post to this blog. I would have hoped for some kind of momentous occasion (like a corresponding 500 point drop on the Dow), but it was not to be. I never thought I'd be writing this blog for this long considering its humble beginnings as little more than a personal diary back in March 2005.

For anyone who has read my blog even a little bit, you know I'm a relatively incurable bearish sort. As such, the past couple of years have been rough sledding for me and other bears. Although there have been glimpses of hope (such as the early summer of 2006 or the brief plunge in February of this year), the market has, since October 2002, been owned and controlled by the bulls. Period.

Markets weren't always this way. Looking at over 80 years of the Dow in the 20th century, you can see a pretty even distribution of bullish years and bearish years (the latter shown in red).

But the past quarter century has been quite different. Offer any reason you like - globalization, mass credit, the benefits of computers - it hardly matters. The fact is that a down year in the stock market has become a rare exception.

And of course, the king of all bull markets, China, shows no sign of slowing down. The hiccup in February is becoming a speck in the history of this market. Except for a small ETF position now and then in some related Asian market, I stay far, far away from China (either bullish or bearish). It's a bubble that no one knows where or when will burst. A true bear market could be years off.

Closer to home, the Dow inched lower today, and a potential double top remains in place. Of course, one strong day could pierce that possibility instantly.

Most U.S. equity markets have a strong resemblance in that, over the past couple of months, volatility has increased (judging from the technical indicators), even as prices have plateaued into relative quiet. Here's the S&P 500......

And a very similar reading from the Amex Major Market Index.......

Today was a pretty hum-drum, do-nothing day, but there were pockets of interesting stuff. ALB, a short of mine, cut beneath its neckline nicely.

BTJ, another short, rose some. But I'm still feeling good about this chart.

Another short, Constellation Group (CEG), eased lower, and the reversal in trend seems convincing.

Housing stocks seem to be rather stuck, although they pushed down somewhat today. ESS is one of them, shown below. Many housing stocks bear a resemblance of this head and shoulders (ish) pattern, but the firmness seems peculiar.

I don't think I've mentioned Entergy (ETR) in a while. I entered a new short position on this today.

JC Penney (JCP), on which I own puts, also eased beneath its neckline (finally!) today.

I toyed with the idea of making my 500th post my farewell to this blog, but I figured that would be a bit too Nixonian. Plus, I do like writing this blog, for the most part. It's an honor.

The main reason I keep writing it is because thousands of people show up every day (for whatever reason) to read what I've got to say. And we've got somewhat of a culture built up around this place. So I might as well keep at it. And, believe me, I'm grateful for your interest and readership.

And, after all, every dog has his day. Stay tuned.

Son of a (Triple) Witch......

2007-06-15T13:20:00.000-07:00

Well, what a difference three days makes.

As of Tuesday's close, things looked just hunky-dory for the bears. Although such a rapid, 400+ point drop from the Dow certainly suggested it was time for a bounce up. But the very unresolved question is whether the bounce was the contratrend in the scope of a real downtrend, or whether the 400+ drop was no more important than the one from late February.

One trend is clear - - comments are up. Even with anonymous posters shut out of the comments section, activity has been ramping up in line with the market's volatility. Big down days bring out the snarling bears, and big up days bring out the told-ya-so bulls. Of course, beanie11111 alone was responsible for 15 of the prior post's comments, so a few people are largely responsible for the activity. (And Beanie - we get it - solar, solar, solar - enough!)

Looking at the $INDU, the best the bears can hope for at this point is a double top. A neat cascade of lower lows and lower highs simply didn't happen.......today's push higher broke that theory to pieces.

If the market does continue its descent next week, the Russell 2000 is, in my opinion, the best place to play it. Not only because of the relatively decent bid/ask spread, but also because it is relatively weak in its performance.

I don't think I've ever mentioned ACL before, but this looks like one which has turned the corner from uptrend to downtrend.

I got into a short position with BEAS today, and it's a bit in the green already, in spite of the market's strength. The right shoulder of this pattern is half completed.

I shorted BTJ successfully a couple of weeks ago. It has bounced high enough for me to be comfortable re-entering this short.

Cardinal Health (CAH), a short I got into a couple of days back, is doing pretty well. It is encouraging to see stocks act weak when the market as a whole is very strong.

Constellation (CEG) has a medium term downtrend that is intact so far.

One highly liquid, low-risk short (or put purchase) are the Diamonds (DIA). A clean stop here would be 136.84

Now that Goldman's earnings are out, I think the risk is much lower to short this stock. The blow-out earnings yesterday actually caused the stock to declined, and it seems toppy enough to me - and far enough away from the trendline - to warrant another attempt.

I first mentioned CRDN as a long back on May 3rd. Since that time, it has push much higher on very strong volume. I guess the war in Iraq is actually good for this firm.

McGraw-Hill (MHP) is a new short for me, entered yesterday.

I added to my MMM puts today, based on the big rebound in the Dow. It closed the day with a nice shooting star pattern and without penetrating its prior high.

I also bought puts on another megacap stock, AT&T (T).

The rails were very strong a couple of months back due to Warren Buffett's investments there. I think it's time to sell into this strength. I sold short a block of Union Pacific (UNP) today.

Nattering Nabobs

2007-06-14T13:28:00.000-07:00

It's a pretty predictable trend. It the market goes down hard, the comments section is filled with kudos, praise, and huzzahs. And if the market goes up big, the comments section is filled with barbs, told-ya-so's, and permabulls. Either way, it's pretty tedious.

As I've said many times, this blog's purpose is for one person - me - to share his thoughts about the market via some charts. Nothing more. You can get ideas from it. You can take those ideas and turn them upside down (short everything I buy and buy everything I short). It's really up to you. All I hope for in the comments section is a place for other people to offer other ideas. Because there's plenty of interesting opinions out there.

Today, like yesterday, was another "up" day (although not nearly as dramatically). That's fine by me. Now, if tomorrow is up too, I'm going to start to worry. A healthy snap-back rally is terrific in the scheme of establishing lower highs and lower lows. But a continuous push higher can result in what we saw back in early March, where the allure of a drop was squashed and the market simply sashayed its way on to new lifetime highs. My view of the S&P 500 right now is along these lines:

I've got some puts on the DIA with a contingent stop at 136.16.

Symbol CEG has a nice series of lower lows/lower highs. I'm short.

Malaysia (EWM), mentioned here before, continues to look toppy in spite of recent strength in Asia.

I mentioned Goldman Sachs (GS) before. It had pushed its way to a new high yesterday, but once earnings were released, the stock fell on the news. It's not that the earnings were bad - on the contrary, they blew away expectations. But "buy the rumor, sell the news" is as true now as ever.

My puts in JC Penney (JCP) continue to do well, although nothing really great is going to happen unless/until the neckline shown on the pattern breaks. But it could be soon.

Gary mentioned my "bearish" energy suggestions; not at all. I think in passing I mentioned CVX and/or XOM for those who considered energy overbought. But I've devoted whole entries recently (such as "Sheer Energy") to the fact that this is the one sector that looks really bullish. The new high on the OIH today is no surprised, nor is the strength of such stocks as APA, SLB, and SWN.

PEG is another promising-looking stock to short, similar to CEG's pattern.

Finally, your clip of the day. This beautifully captures how I've been feeling about the comments section (especially the TTT situation). There comes a point when I just want to jump off the train.

Snapback and Logo Vote

2007-06-13T13:16:00.001-07:00

Today's snapback rally - the best day this year for the Dow, I read - is no surprise. In fact, it's a bit of a relief. A number of readers wrote me before the opening bell today and expressed their desire that the market would push higher to give them a good chance to sell into the strength. So - wish granted!

I wanted to ask your opinion about something. I wanted to doll up the blog a bit with a logo, and I've got four choices. Instead of just me picking my favorite, I'd love to hear your opinion. It won't take a moment....

Here's choice One:

Two:

Three:

Four:

Which is your favorite? Please take a moment to vote; thank you!

The question on everyone's mind - mine included! - is whether the recent sell-off was just a bit of profit-taking in an otherwise uninterrupted bull market. Maybe. But a one-day rally isn't going to change my views. I closed out a handful of positions today, but by and large I am holding strong.

The Russell 2000 - which between puts on the $RUT and puts on the IWM seems to be the most tradeable index on the market - is at a crucial point. It pushed through the supporting trendline but is now within its channel again. The next two days are crucial. If the market pushes higher the rest of the week, a lot of my arguments over the past couple of days are kind of shot.

Apple, my "short it!!" topic earlier this week, fell nicely today in spite of the overall market roaring higher. That is a very, very good sign. My puts are up 75%.

A few reiterations of earlier bullish suggestions that still look good. JetBlue (JBLU):

ONT, with a stop at $2.56:

And Southwestern (SWN):

Side note to Timothy Sykes - thanks for the book. I'm flattered, and I'll check it out!

...And an Awful Lot Like Me.....

2007-06-12T15:43:00.000-07:00

First off, if you didn't get around to reading yesterday's post, you should. It rules.

The trend change that I have been hoping, praying, and wishing for might (I say MIGHT) be here. Whether it is or not, the past week or so has been very good to me. Successful trading comes with its own set of challenges, but I'm enjoying myself. Watching the Dow go from a 90 point deficit to a 20 point surplus today, I had the sense that it was time to get more puts. And that was the right move. Lower lows and lower highs seems to be the rule of the day.

The "culprit" of all this wonderfulness is soaring interest rates. One reader (who shall remain nameless but I shall refer to as SuperCOT COTLover) opined that interest rates aren't going to go up forever. Well, ummm, that's right. But they weren't going to go down forever either. Believe me, there's plenty more that can go wrong to help add fuel to this wonderful fire.

Someone else asked to see my positions. Anyone blinkered enough to spend time every day sharing his best charts and thoughts for no money is stupid enough to show all his positions too, so here goes (the bold items are puts; everything else is a short):

Remember that channel I mentioned yesterday for the Russell 2000? Well, it was cracked today. Good.

And the S&P 500, which had been floating above its channel for a while now, has now achieved - if you will - double penetration. The index is within the bounds of its channel once more. Which only means it is at the very highest reaches of its channel, with ample more room to fall.

And, not surprisingly, the $VIX has been zooming higher lately. Even at these levels, we are far, far below historical averages. During saner times, the $VIX would occasionally push above 50.

ALB, which I've been short for a while, has now completed its pattern. Huzzah!

Oh, remember back on May 22nd that I suggested BTJ as a short? I've marked it with an arrow here. How's that for a call, folks? I (stupidly) closed it out a couple of days ago for a nice profit, but, again, it was just stupid. There was no solid reason to cover the position.

CAM is another one dozens of great short/put candidates.

And the DIA is a great general way to play the market downturn via puts. This is a gorgeous chart. Stop price of 134.76 on this one, if memory serves.

My puts on GOOG are doing well. This is a failed breakout pattern. For such an expensive stock, there is nothing sweeter.

I'm avoiding real estate shorts, pretty much (I've got one or two). Looking at IYR, it is approaching a supporting trendline. Of course, if you read about the billions upon billions of dollars in mortgages that are about to explode, it could be that the real estate downfall has only just started trickling in.

My JCP puts are doing well, although his pattern is not complete yet. But it has a very good shot of doing so.

Check out Sears Holding (SHLD). It has crossed its 20, 50, and 200 day moving averages! Now the fun can really begin.

And for all those who used me as a contrary indicator........keep holding those positions, boys. I'm sure you're right and they'll be back in the black in no time. In fact, double up. You know I'm wrong.

XTC........

Short the iPhone (and everything else.....)

2007-06-11T17:48:00.000-07:00

Let me save the bulls some time and say two things: first, I am jumping-up-and-down, wild-eyed, chart-crazed bearish right now. So if you want to take that as a marvelous contrary indicator, please do so. Second, I've even done some legwork for you. The call option on the S&P 500 for July at $1,625 (which, gosh, should be easy - that's only 7.5% higher than the current market) is a mere 40 cents asking price! The symbol is SPB-GE. Go nuts.

For the bears and my adoring fans: today's post will be more jaunty than usual.

Let me explain the title of today's entry a bit. First, by way of apology, let me say I've been Steve Jobs' Biggest Fan since before most of you people even heard of the guy. I've followed him since 1982, and one of the main reasons I even live in this area is because My Idol is here.

I think Steve's return to Apple in 1997 is one of the great acts of justice in human history. Displacing people like Michael Spindler and Gil Amelio - who have all the charisma of used shag carpeting - made the world a better place. And I used to be an Apple employee - number 9653 - back in the late 80s. So I've got no ax to grind.

But.

I also know that things run in cycles. And I also believe there is an inverse correlation between hype and results.

Take the Segway for example. Before this was introduced to the world, rumors flew around about Project Ginger (its code name). Breathless reviews from the likes of Larry Ellison and the aforementioned Mr. Jobs made people wonder what this miraculous creation was. I believe it was Jobs himself who said that entire cities would be designed around Ginger.

Well, they weren't. And won't be. The fact is, for all its hype, Segway has wound up to be little more than a curiosity. It still attracts attention. But most people gawking at a man buzzing about on a Segway are less interested in the mode of transportation than they are at the fact that the rider will probably die a virgin. At least, that's what I'm thinking. I'm a geek. But, Jesus Christ on a Biscuit, I'm not going to be riding around town on a Segway.

You know where this is all leading. That's right, the iPhone. Good God, I've never seen hype like this. You'd think that, given the price and hype, the phone would jump under your desk and pleasure you orally between calls. Two facts keep leaping to my mind. First, phones can be had for $9.99, far less than the $500 introductory price of the iPhone. Second, I don't know about you, but I've got a phone. And I'm pretty happy with it.

People are expecting the iPhone will perform miracles with Apple like the iPod did. It won't. Let's turn back the pages of time a bit and understand the iPod introduction better.

The first iPod was introduced early in October, 2001. This was not even a month after the terrorist attacks. People scoffed at the introduction. Call it anti-hype.....sort of the reverse of what we are seeing today. Here was this microcomputer company, which for years had sold multi-thousand dollar machines, entering the consumer electronics business dominated by low-end players like Sony.

Now, as you can see from the graph below, Apple's stock did pretty good after the introduction, but it faded back again, and it sank to even lower lows. The stock got down to something like $6.50 (don't you wish that time machine was handy, folks?) So the iPod clearly wasn't seen as any kind of savior for the company, nor was it the object of frenetic optimism.

So what happened next? Well, the Apple magic started to work. The brilliance of offering an accessible way to purchase music, great software to manage your music collection, and an elegant, highly mobile piece of hardware started to take hold. And Apple's stock moved up not hundreds of percent, but thousands of percent. The iPod made Apple more successful (and the stock more expensive) than ever.

Which brings us to today. Apple is deep into triple-digit territory. Steve Jobs would probably win the presidency of the U.S. if he ran. And there are thousands of Apple zillionaires running around Cupertino. The company seems like it can do no wrong. I notice even The Economist put Apple right on its front cover last week.

I took all this into account. And although I rarely depart from charts as my rationale for decision-making, I bought a bunch of Apple puts early this morning. And, as the market closed today, those puts were already up 35%. Not bad.

Now, it's not that anything horrible was announced from Apple today. Steve Jobs gave a talk at the WWDC, and everything seems pretty hunky dory. But if I can smell a top, folks, this is it. And I'm not predicting Apple will wind up like a completely devastated shell like, oh, Sun Microsystems. But if the contrary workings of hype have any merit, this has got to be one of the all-time great hype fades of modern history.

Phew. OK. Back to the markets. As I said earlier, I'm more bearish than normal. Which is saying something. Part of the reason is that, viewing the $SPX minute graph, I sense a sea-change has taken place in the trend. I've drawn it below.

I have acquired an ungodly quantity of Russell 2000 puts, predicated on the notion that the channel, drawn below, will likely be broken. And the beauty part is that if I'm wrong, I'll know swiftly, and my losses will be manageable.

I look at a chart of the $INDU below and get so excited I must excuse myself from standing for fear of embarrassing both myself and those around me. (In addition to generating pangs of jealousy amongst my bullish readers). To me, this is a chart jumping up and down, shouting "Top!" with great gusto.

Reducing the granularity of the chart to a weekly from a daily, we can plainly see the bearish engulfing pattern which took place last week. This week - Wednesday, Thursday, and Friday, to be specific - is loaded with important economic indicators. Here's hoping they shove the markets lower and help increase the minuscule bits of angst floating about into a growing sense of dread.

The S&P 500 weekly offers, to my eyes, similar conclusions.

Let's look at a handful of individual stocks. I'm going to get into a short position with Amazon (AMZN) tomorrow morning.

CAH, offered by a thoughtful reader, also looks like a sharp short.

As does CEG, also offered by a kind reader (and I do appreciate those emails and charts, folks).

Let's pause another moment and consider CROX. Let me say right now I am not short this stock, and I don't plan to be short this stock. I nibbled on some puts a couple of weeks ago, and I was promptly stopped out. I've learned my lesson. This is a momentum play, pure and simple. and I shriek like a little girl when I see this chart. No touchee.

We can compare CROX to a similar stock from many moons ago called Taser (TASR). Here's what TASR was doing back in the day. Check out the similarities of both price and volume action.

What happend to Taser after it peaked? Well, you already know that answer, don't you? Here's a percentage graph. Will CROX suffer a similar fate some day? I bet it will. I really doubt you can ply an ongoing competitive advantage off some cheap-looking fad-driven "shoes." But I, for one, am not going to guess when the momentum is going to run out. No thanks.

OK, back to shorts. Entergy (ETR) is a good idea to consider. And remember, folks, these are just ideas. Read the top of the screen. None of this is advice. I'm just spoutin' my feelings and notions. So settle down.

I mentioned GOOG as a long idea. Ya know what, I've changed my mind. I think I might buy some puts on this one, mostly for the same reasons as Apple, although not nearly to the same extent. I see a failed breakout happening here. Maybe.

And if you think the energy/oil run has gone berserk, Exxon Mobil (XOM) presents a relatively low-risk to play this on the bearish side.

That's it for the day. If the week rolls in my favor, you can expect more videos and such. Until then, please think about what I've said above. I'm right from time to time.

Nice

2007-06-08T23:01:00.001-07:00

After Thursday's big drop, I speculated that today we would see a short, sharp drop followed by a big rally. Well, even I can get it right every now and then. That is precisely, 100%, what happened.

I think there's a decent chance, however, that we may have moved into a new phase of this market. Maybe that is just wishful thinking. But I don't think today's big 150+ upside move on the Dow is the beginning of yet another assault onto new highs. Instead, I think it's just a pullback in what seems like could be a staircase down. We'll see.

One of the main reasons I thought we'd see a big move up today is because of the many instances of supporting trendlines around the closing levels of yesterday. This graph of the S&P 500 shows how the upper trendline of the (now broken) channel represented meaningful support for the index. Sure enough - boing! - it bounced right off of it. But I really think we're going to re-enter channel-land next week.

I tripped across Checkfree (CKFR) and got into a short position there. This is a honkin' big head and shoulders pattern, although as yet incomplete.

Goldman Sachs represents the kind of stock on which I'd like to own puts once the relief rally peters out (which could probably be about 30 minutes into Monday's session). I closed out the vast majority of my positions and am sitting on a ton of cash right now, waiting to re-enter shorts and puts at good levels.

NutriSystem is definitely on my list, too. This seems like a great bearish play, now that it has pushed its way up to formidable resistance.

I took the plunge with ONT today, buying a large block of shares. It's my only long. But this is a sensational-looking graph, particularly with the explosion in volume, and it has fallen to a price level that is reasonable compared to where it was at a couple of weeks ago.

Whirlpool (WHR) did what so many large stocks did this week........fell hard, and then recovered to a neckline (more or less) today. These are great set-ups.

Rock on. See you next week.

Love So Deep, Kills You In Your Sleep

2007-06-07T13:11:00.000-07:00

I'm no better. I just know I'm not any better of a person than any of the bulls that frequent this board.

When the market is roaring higher........when bears like me are getting slaughtered .........it's only natural that you gloat. You announce how the market is just going to keep going up forever. You wish for the destruction of all the bears. And you offer up reasons why It's Different This Time and there will never be a down market in your lifetime.

So - as the kids say, good on you, because I'm no better than that. The market is a battlefield. Wiser souls - of which many claim to be, but hardly any of them are - are truly neutral, and they position themselves to try to take advantage of the ebb and flow. Mere mortals, like your humble narrator, tend to be more dogmatic. History - and human nature - tend to make the vast majority of them bulls. And a vanishingly small number are bears. So - join hands around the campfire, and let's sing!
I hate you. You hate me. We're a trading family. With a big fat drop, and a knife from me to you. This one day, you get the screw.

So allow me to remind everyone of the disposition just four trading sessions ago. Last Friday, June 1st. Hardly a blip in time. The Dow had made another lifetime closing high. Let's review some of the comments offered up:

Permabull NewEquity wrote: I just bought 100 DIA calls mid-day for the ride back up through all time highs. No resistance at all and we should break 14k Dow in the next 3 weeks according to my tech analysis guy.

John (B) predicted, regarding the S&P 500, whose closing price today was 1490.72: "Putting these numbers in my model, the 500 fair value today is 2,300...and based on earnings for next year, fair value would be about 2,800."

And, lastly, Beanie11111 declared the bottom for a number of stocks: "...AKAM has bottomed...SBUX has bottomed.....WFMI has bottomed." As a follow-up, in the mere four days since that post, those stocks have declined 3.2%, 5.9%, and 6.5%, respectively. So I guess some people have different understanding of bottoms than others.

Suffice it to say, the past three days have been very good for me. Indeed, I had trouble deciding what charts to show, because they are all gorgeous. Every single one - every one - of my dozens of positions pushed way higher today. I even made some very profitable intraday option trades - both long and short! - with the Russell 2000.

The Dow fell 1.48% today. And, after the regular market closed, the ETFs on the indexes just kept falling. The DIA wound up down 1.96%.

I actually would not be surprised to see a very short, very sharp drop first thing in the morning followed by a rip-roaring push up. Looking at this channel, it seems to me the selling is a touch overdone (on the very short term) at this point. You hear me, fellers? I'm not saying we're going to enjoy another 4th day plunge. Nice as it would be.

Zooming in closer, you can see what I mean. Now, of course, all trendlines are eventually broken. And if the one shown here is decisively snapped, it could be a new ball game. But the past 11 months have made me paranoid, and although the last 3 days have been sensible, I still don't trust this market or its participants.

Akamai (AKAM) hasn't plunged as fast as I hoped, but it's doing OK. It's still a very nice pattern, and I've got some nice green on this one.

CSX is way the hell above its trendline, and it is sporting a cute little head and shoulders pattern to boot.

CVX would definitely pop up if the market strengthened, but that would just give me another opportunity to add to my bearish position.

I closed my Deere (DE) puts today at a nice profit. Not because I think the stock is going to be strong. But only because I'd like to re-enter them at a better price, assuming the market "recovers" some in the very short-term.

The Asian markets are having a touch of reality. My EWM (Malaysian market) short is doing nicely. I daresay the Asian markets will kind of freak out during their Friday session, which might make our Friday session interesting as well. But, if forced to bet, I'd say we'll probably close higher, Asian freakout and end-of-week jitters notwithstanding.

InfoSys (INFY) finally cracked its neckline, although it still seems to behave stronger than I'd like to see. Would you plunge, already?

JC Penney (JCP) - on which I bought puts yesterday - had a nice fall due to weak retail sales. Of course, a true break of this neckline - - - the pattern is only just forming now - - - would make these puts fantastically profitable.

Merrill Lynch (MER), along with my other investment bank shorts, soured (for the bulls) today.

Oh, a couple of final comments to two users before the video. TomTheTrader, please stop posting your URL. I consider that an ad, and I'm going to be more consistent about nuking comments that are ads in any way. And Gary - for goodness sake, we get it. COT, COT, COT. Message received and understood. Lordy. Oh, and as for you readers that only show up on big down days like this......shame on thee!

Anyway........

The Less We Say About It, The Better

2007-06-06T12:29:00.000-07:00

Two good days in a row. I won't get used to it. The crapola bull-filled last 11 months has left me bitter and disillusioned. But seeing a bunch of green over the past couple of days has been nice. I was prepared for all the pointless "Buy the dips!" and "Get in now to ride to Dow 15,000" nonsense in the comments section. It's what you can expect.

The S&P 500 over the past couple of years was in a giant, upward-sloping channel. The highlighted area is the "above even the top" chunk. The madness exceeding the madness. At a minimum, I would expect us to at least re-enter the aforementioned channel.

The $VIX, understandably, has shot higher, given the approximately 200 points blown off the Dow 30. Fear is on the rise. Finally.

AutoZone is one of those nice shorts which has a tight stop but plenty of potential downside. It's one of those charts that could represent a major trend-shift but doesn't make you pay through the nose to see if you are right or wrong.

Bunge (BG), mentioned here many times already, is on its way to its target price. This is a short position (obviously).

A thoughtful reader sent me a suggestion of symbol CEG. This is a handsome looking short. I have no position in it, but I'll follow it from now on.

Big Blue, good old IBM, really got smacked today. I've got puts on both IBM and Honeywell (HON), both of which pushed much higher on the day.

I am showing NVR again simply because it is such a "Fibonacci friendly" stock, to use a phrase I coined a while back. The way it bounces off these retracement lines is really a sight.

I've unsuccessfully owned puts on Sears Holding (SHLD) in the past, and it has never worked out. Once more into the breach, dear friends.

Since I'm feeling a little better, I'll keep throwing the goodies your way. Here's the marvelous Naive Melody from you-know-who.

My Nude Pictures of Ernest Borgnine

2007-06-05T22:58:00.000-07:00

Finally, a skosh of relief for the bears today (only those truly secure dare offer the word skosh in their blog). The market was down over 100 points several times today (but just a skosh) and wound up down 80. Freakishly, the QQQQ left the day unchanged.

In any case, I made some nice green on some intraday Russell 2000 option trades. I'm too war-weary from the past year to hold these suckers overnight, but I can at least say I like the current $INDU chart more than I did 24 hours ago:

The Russell 2000 (side question: has anyone found ANY other index with a reasonable bid/ask spread on the options?!) has been rather strong lately but edged down about half a percent today. No sea change by any means, but we take what we can get.

And, for good measure, here's the S&P 500:

I haven't put a chart up of the $UTIL for a while, but whether you've noticed or not, interest rates have been really pushing higher lately. (Remember those? Low interest rates? The reason the market's been so bullish.........remember?)Worldwide interest rates have been surging, relatively speaking. Gentle Ben's remarks today pushed them higher still.

My suggestion of Coach (COH) as a short is decent thus far.

I am short a lot of housing stocks. Today was a good day for those positions due to the interest rate movement. Essex (ESS) is particularly attractive.

Just yesterday I said Google was a nice looking long position. Today (of all days, considering the market's weakness) it made a nice lifetime high. So - clink! - here's to another zillion dollars for all the adolescent Google zillionaires out there. I'm talking about their employees. Not you.

KRC is another sharp-looking housing short.

I've been charting the thirty components of the Dow Industrials recently, and 3M Corporation (MMM) is a favorite of mine. I've got some puts on this. Continued Dow weakness would be very kind to those.

Oh, and one last thing. JakeGint's pondering as to what "we" saw in George Carlin left me shocked. So here's another clip.

John Wayne/SNA

2007-06-05T14:15:00.001-07:00

Yeah, yeah, Tim. We know. You're at an airport and don't have time to post until later tonight. We get it.

In the meantime, enjoy one of the best George Carlin bits of all time:

How Now, Mao Dow?

2007-06-04T12:39:00.000-07:00

There was a time, not long ago (like, ummm, early last week) that I would have felt cheated and flustered by the Chinese market's tumble not having a bearish effect in the U.S. But at this point, I am so utterly distrustful (and numbed) by this market that I'm not at all surprised.

The Shanghai index fell the equivalent of over 1,100 Dow points last night, and our market - of course - went up. I truly believe - and I am seriously not exaggerating - that a nuclear bomb on a major city would not cause a major disruption in this bull market. I swear to God, this market is insane, and even the death of a million people would not stop it. It has lost its mind.

So. Having said that, let's look at a few charts.

Crude oil is pushing higher. Looking at the continuous futures chart, it seems to have plenty of room on the upside.

The strength in crude is obviously good for oil service stocks. The OIH is at a new lifetime high and had a very strong day today.

I mentioned last month how bullish energy looked, and stocks like Apache (APA) have been stars.

Conversely, companies which suffer due to high fuel costs got hurt today. My short recommendation of American Airlines (AMR) is doing well.

One I don't think I've mentioned in the past on the short side is BEA Systems (BEAS).

I have, however, mentioned Bunge (BG) a few times, and this one is shaping up nicely.

Capital One (COF) is sort of stuck right now. I own puts on it, and they haven't done a thing, but I am still hopeful about this position.

Federal Realty Trust (FRT - "don't giggle at our ticker, please") looks like a clean bearish trade to me as well.

I don't mention Google (GOOG) much, but this stock looks like a strong buy (yep, buy). This chart is strong, and the volume has been inching higher. Obviously this company is an ungodly powerhouse and is doing well at the expense of poor Yahoo, which seems to be dying an agonizing death.

I bought puts on Honeywell (HON) today. Maybe a lil' double top here.

The investment banks seem to be edging south, in spite of the market's continued strength. Merrill Lynch (MER) in particular looks good for a short play.

Some Weekend Ideas

2007-06-01T13:05:00.000-07:00

Another day, another record in the markets. So it goes, right?

Looking at the long-term Dow 30 chart, I frankly don't see any clear place where the push higher is going to stop, at least from a technical standpoint. We are sort of in unchartered territory. Only a sea-change in something.......a monstrous terrorist attack......a fundamental downturn in the economy......is going to make a difference.

Ken Fisher has a pretty good point where he talks about the spread between the E/P value (that's not a typo - earnings divided by price) and prevailing corporate interest rates. I'm paraphrasing, but his rationale goes something like this - the average P/E on the S&P 500 is about 17 right now, which means the E/P is akin to an interest rate of 5.8%.

However, the cost of borrowing money (for which a corporation can deduct the interest) is, once you factor the tax savings, less than 4%. So it's more economically efficient to borrow tons of cash and buy back stock. In his view, until that gap is closed, the market should continue to go higher. Assuming neither interest rates nor earnings (the "E") change, a rational value of the Dow would be at something like 18,000.

I've been battered enough over the past year to not question that kind of assumption. I'm not putting my money on it, but there's no reason to say it couldn't happen.

The American Stock Exchange's $XMI index had looked like it was going to start heading south again, but nope - it pushed to another lifetime high.

I've got a few specific stocks you might want to check out. If you think just about all the good news that can be had about Apple (the AppleTV/YouTube functionality, the forthcoming iPhone, the raging success of the iPod......) is out there and that AAPL is price for perfection, consider some puts on this high-flying stock.

Coach (COH), the purse/leather giant, also might be prone to a fall.

I like the look of Excelon (EXC) here too, for a bearish play.

For bulls, Micron (MU) seems to be turning higher after a prolonged slump. It had a really good day today, and volume has been surging over the past several months.

Those who miss the goofy videos and funny pictures will have to wait until this market gets easier for me to understand. For the time being, it's just dry charts and sober analysis.

Talk About the Weather

2007-05-31T13:09:00.000-07:00

I've always felt a bit sorry for meteorologists here in the San Francisco Bay Area. Because, between about April and October, they really have very little to say. The forecast is, more or less, as follows: "There will be patchy morning fog, clearing by late morning. Highs on the coast will be in the lower to mid 60s, with lower to mid 70s around the Bay and low 80s farther inland." It varies little from day to day, week to week, month to month. No rain. No hail. No nothing.

I'm starting to feel a bit like that about the markets these days. "Horrible economic news was reported to me. The markets rallied on the news to historic new highs. Bearish patterns were laid waste."

Oh, well. At least we didn't go up another 120 points today. The economy came in with the weakest numbers since 2002, and the Dow was basically unchanged. Looking at the RSI and slow stochastic, you can see how the market is seeming awfully tired, in spite of the progression in prices.

Much the same can be said of the S&P 500 ($SPX).

I was distraught at all the gorgeous real estate head & shoulders patterns getting trounced yesterday, but maybe there is hope yet. Apartment Investments (AIV) is no longer a perfect H&S, but today's weakness is a good sign.

I haven't posted American Airlines (AMR) in a while, but this is a head and shoulders pattern which remains cleanly intact with what appears to be a nice retracement to the neckline in progress.

JC Penney hasn't completed its pattern yet, but - - - it could! Keep an eye on it.

A lot of investment banks seem exhausted lately, whether you look at GS, LEH, or any of many others. Here is Morgan Stanley (MS), which seems to have made a bit of a double top.

Whirlpool (WHR), a Dow 30 component, is very lofty right now. This seems to me a short with an attractive risk/reward ratio.

And the Big Oil stocks - Exxon Mobil (XOM) is a favorite of mine to watch - likewise have an attractive risk/reward ratio for shorting right now.

There's a ton of economic news tomorrow morning. Let's see if June gets off to a better start for the bears than May was.

The Price of Tea in China

2007-05-30T14:57:00.000-07:00

Unstoppable. The bulls are simply unstoppable.

As you know, before the market opened this morning, it was greeted by the news that China's stock market had fallen more than 6% (that would be like the Dow falling over 800 points here). Naturally, our markets opened lower. And they spent the day pushing higher.

To a new record close.

The Dow's at a lifetime high. So is the Russell 2000. And, unless I'm mistaken, so is the S&P 500. It's enough to make me consider renaming this blog The Wall of Worry.

In a balls-out bull market, traditionally bearish patterns get squashed. The chart below is a good example. This is a great-looking head and shoulders pattern. Or at least it was, as indicated by the highlight. But the market doesn't care. It's simply too strong, and this pattern - as with so many others - has been neutered.

I am buying energy stocks, because they are just about the only bullish charts that look like they have firepower behind them, as opposed to just being momentum plays. Here's Apache Corp (APA). Notice the good surge in volume on today, a very good "up" day.

Much the same can be said of Southwestern Energy (SWN).

That's about all I have to say today. This is just getting to be a bit much!

Indecision

2007-05-29T13:10:00.000-07:00

For those of you who didn't read this morning's post, please check out The Chart Project, which is a little something I've been putting together. I'd love it for some of the readers here to contribute.

The market is in a pretty serious state of indecision. It could be just gathering its breath before it makes an assault on Dow 14,000. Looking at the Dow 30 over the past few months, however, it seems the technical indicators point to a reduction in prices as opposed to a fresh surge.

The Major Market Index ($XMI), although shaped differently, seems to present a similar argument. Especially if the old saw "Sell in May and Go Away" holds true.

The head and shoulders pattern, a favorite of mine, showtimes holds together and sometimes doesn't. Akamai (AKAM), mentioned here often recently, seems to be moving in accordance to its pattern.

Real estate stocks, on the other hand, seem to have violated their recent head and shoulders pattern across the board. Essex (ESS), shown below, is a good example - as is the much broader IYR. This doesn't necessarily mean the bearish pattern is moot. But it definitely diminishes its credibility, since prices have soared above the neckline.

Symbol ALB seems to be forming a nice trend change as well. I would say this is another head and shoulders pattern as well. They seem to be common these days.

The Chart Project

2007-05-29T04:34:00.000-07:00

I do a lot of reading about electronic communities in my job, and I hit upon an idea that I call The Chart Project. Simply stated, it's like a Wikipedia for chart images.

I'm not sure if people will ultimately submit zero charts or hundreds, but I'm hoping to get some activity there. I've started by submitting dozens of my own chart samples. If you have any charts that are good example of technical patterns in action (channels, head and shoulders, saucers.......what have you) please submit them! I would love to see this little project get some traction. Thank you!

Chart-Free Memorial Day

2007-05-25T16:33:00.000-07:00

From time to time, there's just nothing new to say, and I don't want to waste your time with the same old charts.

Turn off your computer and enjoy the long weekend. We all could use a graph-free break! See you all again on Tuesday.....

Some Day This War's Gonna End

2007-05-24T13:27:00.000-07:00

It was a good day today. At first, I was distressed to see the Dow blasting higher, well past the 13,600 mark. It was up nearly 100 points. But I noticed something. Looking at the $RUT and the $SPX, they were not at new highs. In fact, it looked like the Dow's strength was just pushing them into making a right shoulder on an intraday head and shoulders pattern. So I bought more puts.

That was the right move. The Dow went limp, soft, and squishy, and we enjoy a nearly 200 point intraday turnaround. Every single position of mine was way in the green.

Oh, please remember to sign up for MyBlogLog, which now has nearly 100 members! It's free, and it's a fun way to see the other folks that have made the trip to The Slope of Hope.

Now, I am maintaining my cautious and newly humble disposition, so I will say, in the face of today's fall, that we must exercise caution. Just look at all the recent falls in the past few months. Every single one of them was just a blip - a momentary pause - before the market shot higher still. So a grudging respect for the bulls is in order.

I mentioned Bunge Ltd (BG), and it is doing beautiful. The perfect presentation of lower highs and lower lows.

I mentioned yesterday that housing stocks had pushed up to their necklines, and I was going heavily short to enjoy the hoped-for fall. It did just that. It's nice when patterns behave as they should. Here's Essex (ESS) as just one example.

InfoSys (INFY) at long last cracked beneath its neckline. Now we can get serious about making some cash on this one.

PSB also enjoyed the aforementioned housing H&S fall.

Vornado (VNO), suggested by a reader here last week, is another honey.

Whirlpool (WHR - has that for a boring company?) is flipping direction too. Good.

And now, your thought for the day.

Thanks, Alan

2007-05-23T15:43:00.000-07:00

The market surged again this morning. The S&P 500 was at a new lifetime high. As was the Russell 2000. As was the Dow 30. It looked like Dow 14,000 was just around the corner.

Then Alan Greenspan - bless him - threw some cold water on the excitement by speculating the Chinese market was overheated and headed for a fall. That's all it took to render the breakout (shown in green) moot (shown in pink).

Now, the Old Tim would have been dancing around shouting about how it's the end of the world. But the New Improved Tim With Integrated Timing (figure the acronym out for yourself), severely humbled over the past year, will do nothing of the sort. Indeed, if you think back to Greenspan's most famous declaration ever - - "irrational exuberance" - - it might be instructive. He said it on December 5, 1996, and you can see the brief aftermath here:

But if you take a longer view, you will note that the irrational exuberance had barely even started. The market went up hundreds of percent more, as measured by the NASDAQ.

Not to say that I'm unhappy with today's small tumble. A look at the major indexes shows they are very tired. Here's the S&P 500:

And here is the broader Major Market Index ($XMI):

There's an interesting article by Herb Greenberg about the fact that brokerage margin debt is at a never-seen-before high. Obviously people are willing to go into debt on a widespread basis to buy into the recent mania. If you think the shorts are only going to get squeezed worse, you might want to check out this blog which focuses on opportunities to go long on stocks that may be squeezed up.

I am still short Akamai (AKAM), and its head and shoulders pattern (an obvious favorite of mine) is nicely intact.

AutoZone (AZO) is finally getting serious about falling.

Carnival (CCL), which had some recent strength, is again at a relatively low-risk zone for shorting.

Housing stocks, strong yesterday, are a safer short now. Here is Essex (ESS):

Infosys (INFY) is inching ever-so-slowly toward its neckline. If and when the neckline is broken, a substantial fall would seem in order.

Martin Marietta (MLM) may have double-topped here, and it is far above its supporting trendline.

Morgan Stanley (MS) is sporting a nice shooting star today. Granted, many recent shooting stars have been rendered moot by the market's strength. Still........

And Whirlpool (WHR) is likewise far enough above its supporting trendline to present an attractive short (or put-buying) possibility.

There's a ton of economic information coming out tomorrow morning. It should make for an interesting session.

Small Caps Catch Up

2007-05-22T15:09:00.000-07:00

The market pushed higher today in fits and starts, and in the end, the Dow and S&P 500 closed down a little while the Russell 2000 - home of smaller cap stocks - pushed to a new high.

Even though the market seems unfazed by the weakness in NZD/USD, it is still worth watching. This currency pair has done a decent job indicating recent turning points in the market.

One stock I don't think I've mentioned before is Bunge. This has made a flag pattern recently. You can make of the pattern what you will:

BTJ has been a recent high-flier that might make a good short candidate:

CRS had a nice breakout a few weeks ago, but this breakout seems to be losing steam in a big hurry. Failed breakouts make great shorts.

Much of the housing sector - - lenders such as AHC as well as builders like BZH - had a nice bounce higher today. I took it as a good opportunity to enter some shorts of stocks that were retracing their head and shoulders pattern to the neckline, such as ESS, shown here.

Honeywell (HON) is starting to lose ground.

....as is Microsoft (MSFT)...

A couple of long suggestions. JetBlue, mentioned here not long ago as a potential buy, looks good. A series of higher lows and agreeable volume trends make this a handsome candidate for puchase.

And Questar (STR), also mentioned in the past, continues to prosper after its well-formed breakout.

The Indexes Change Places

2007-05-21T11:52:00.000-07:00

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.

Sheer Energy

2007-05-18T13:14:00.000-07:00

Another record. This is getting really monotonous.

One index that hasn't actually reached a new record, but is within a hair's breadth of it, is the S&P 500. It peaked back in January of 2000, and if Monday is up at all, it will almost certainly reach a new record closing high (and I don't need to tell you the financial media will make a huge stink about it).

The $VIX remains very, very low, indicating widespread complacency. You can see how the VIX deteriorated from 2003 through 2005 and has remained low ever since. There was a time when the normal VIX range was between 20 and 50 or so. These days, it's lucky to even stay in the teens.

Real estate has been getting hit, in spite of the market's overall strength. I've got a number of real estate shorts, one of them being AIV.

Akamai (AKAM), which I am short, went up some today, but I am still comfortable that this pattern is safely beneath its neckline.

One days like this, if you see major stocks with weakness, that's usually a very bearish sign. The CME is a good example.

InfoSys (INFY) is an even better example, since its pattern is more clearcut.

The thirty stocks which comprise the Dow 30 Industrials have obviously been very strong, by and large. MMM is no exception, although it seems awfully lofty right now, and it is sporting an impressive shooting star with today's action.

Energy has been incredibly strong. I've mentioned some oil service stocks here recently as good bullish plays. But even looking at the general OIH stock, which represents an amalgam of oil service securities, you can witness the terrific strength lately.

PSB is an other short of mine that has been enjoying the real estate tumble.

Finally, VNO is another participant in the real estate slump, and it features a really nicely-defined head and shoulders pattern.

Snoozer

2007-05-17T13:10:00.000-07:00

I see several dozen people have signed up for MyBlogLog. Cool. Basically what it lets you do is sign up with your name and a photo, and you can check out what your fellow readers are also reading. It's a pretty cool way to amble around the community of readers we have on this blog and find interesting new stuff.

Today was a rather yawner day. The Industrials crossed above the 13,500 market, and then slumped in the last part of the day to close slightly down. The Dow is really running on fumes at this point, given its rapid ascent.

I keep an eye on the currency markets too. I've mentioned the NZD/USD here many times before. As you can see, there is a very strong correlation recently between the NZD/USD and the U.S. Markets (I've used the S&P 500 here).

The $XMI is also a good illustration of how the market may be in a position to "roll over" after this explosive upswing.

I'm hanging onto my BSC puts. They are doing OK - nothing spectacular yet.

Energy stock DRQ, mentioned here bullishly before, looks better than ever. I'd put a stop of $44.11 on this.

A reader mentioned ESS as a good short idea today. I agree! (A similar conclusion could be had with VON).

My InfoSys (INFY) short is also doing pretty well, although it needs to break that neckline to get juicy.

It might be a good second chance for those of you wanting to be short JC Penney (JCP) to get in at a better price now.

PSB - like many real estate stocks today - fell pretty hard, and it is right on the cusp of violating its neckline. Lovely!

Another bullish energy play - SWN - looks terrific.

Go sign up for MyBlogLog if you haven't already! :-)

The Slope of Hope

2007-05-16T22:04:00.000-07:00

First off, as you can see, I've dolled up the site a bit. After I added MyBlogLog (for which you really should sign up - it's pretty cool, and it's free) I decided to spruce things up a bit, including the title of this blog. Perhaps you haven't heard the old saying about how markets climb a Wall of Worry and fall down a Slope of Hope. But that's where the title comes from.

On the plane home, I started reading Ken Fisher's The Only Three Questions that Count. I like it a lot so far. You might want to check it out if you enjoy Mr. Fisher's writing in Forbes.

Today was another weird day on the market. It was weird in that, once again, my totally bearish portfolio gained value in spite of another triple-digit climb on the Dow and another record high. And it was also weird that, yet again, really crummy economic news came out, yet the markets cheered. What a bunch of psychos. Oh, well.

BBD has been mentioned here as a bullish play, and it's looking stronger than ever.

I also like (bullishly speaking) CRDN.

I have avoided copper for a while, but I think I'm going to acquire some puts on Southern Copper (PCU) based on its location within this channel.

John Deere (DE) is something on which I already own puts, and I like the look of this huge bearish engulfing pattern, particularly since it was in the context of a big "up" day.

Real estate is getting even weaker, and KRC is another good short within that world.

Lastly, I hate to bore you with another ONT chart, but I continue to be amazed how well this stock is doing. It was first mentioned by a reader in this blog at the point where the arrow is showing, and I agreed with her bullish take on the stock a few days later. Since then, it has more than doubled, and on amazingly strong volume.

It's nearly midnight, so I'm off........see you at the regular time tomorrow afternoon! And remember to sign up for MyBlogLog - it's a kick!

Phoenix

2007-05-16T15:50:00.000-07:00

Greetings from the land of perpetual 100 degree heat. Phoenix. I just spoke to a large group here today, and I'm at the airport. And you know what that means........ that's right, a very late posting!

In the meantime, you might want to check out MyBlogLog, which is the widget I've added to this site showing the most recent readers and for which you need to sign up in order to participate. It doesn't cost anything, and it's an interesting way to connect with others. My web skills are pretty limited, so I need to figure it out how to get it on the sidebar instead of dominating the top of the blog!

I'll post (much) later tonight........

Immune

2007-05-15T13:56:00.000-07:00

I'm not afraid.

I used to be. I really did. It's hard not to be fearful when a market has completely lost its mind. It's hard not to be afraid when tens of millions of Chinese investors - not a one of which has any clue what he's doing - are running around predicting their market will reach 8,000 now that it's reached 4,000. And it's hard not to be afraid when it seems the whole world has discovered how to print trillions of dollars (without inflation) that they want to dedicate solely to buying up companies.

But I'm not afraid.

A day like today is why. Because the Dow can reach yet another all-time high, and my portfolio.......which is 100%, All-American, red-blooded shorts and puts......goes up handsomely. And I can grab my XXL codpiece, stare the market right in the eye, and shout an obscenity which rhymes with "Truck Blue!".

Because the fact is, folks, if I can make money in a market like this, God help you bulls when it actually goes down. Because your days are numbered.

I find the Chinese prediction of 8,000 on the Shanghai index particularly amusing. I know that 8 is considered a lucky number in China. So - naturally - there's no reason the market won't zoom to 8,000, is there? Added to which, I read that many investors there decide that a share of stock is a good buy if it costs less than a portion of pork meat.

Idiots.

I've decided if my loyal readers and I decide to seek haven in a safe zone, we shall flee to the district of Yaroslavl Oblast in Russia. Their flag, my hand to God, looks like this:

A bear carrying an axe. We, my friends, have found our homeland.

Speaking of homes, the widely-reported slump in housing has not hit my beloved Palo Alto. On the contrary, prices have never been higher. Just a few doors down from my house is the following charmer. It features no landscaping. 950 square feet of living spaces. And sixty year old plumbing. It can be yours for $2 million. (Actually, I'm joking about that - - because it was snapped up a few days after they put a sign out in front, and it can, in fact, not be yours at this time).

The Dow Jones 30 - which is far and away where all the strength is these days - tried very hard to push its way up to the 13,500 mark. After ascending nearly 150 points, it went completely flaccid, and it wound up 37, creating this lovely shooting star.

Here's an update on my positions (newbies - click any image for a bigger version). Bold items are puts. Others are shorts. Not a long in the group (although I will mention that my long suggestion of ONT continues to explode higher).

My short in Akamai (AKAM) did great today, and what is more important, it is set up for a spectacular fall from here.

Acuity Brands (AYI) also has a hell of a lot of open air to collapse.

AutoZone (AZO) finally - FINALLY! - took a tumble. Much more to come, I think.

My puts in Bear Stearns also performed nicely.

Merrill Lynch is starting to deteriorate, now that it has made a base camp for itself at this key Fibonacci retracement level.

Lastly, the NASDAQ QQQQs slumped badly, just as my beloved Russell 2000 did.

So in spite of calming inflation news (ummm, fellers, how much good is a .25% interest cut going to do you when the economy is irrevocably crumbling?) it was a terrific day. Let's have more of the same.

I'm not afraid!

'Til Tuesday

2007-05-14T15:34:00.000-07:00

It's really simple.

Tomorrow morning, the CPI will be released. The market will react. If it reacts poorly (which means down, which is a good thing), it's party time. If it finds the report vigorous and exciting for some reason, that's a bad thing for us. Because, simply stated, today made a lot of sense to me, virtually all my positions went up, and all my charts are positioned for juicy profits tomorrow. But a perverse reaction to the CPI could muck that all up in no time.

I said last week that Massey Energy (MEE) was looking like a good short, given its head and shoulders pattern. One person wrote in that evening's comments section.....

I'd stay away from shorting MEE... One of these Merger Monday's it's name is going to be on the "acquired list" and that's going to suck for anyone short it. Crappy management, but great reserves, and the coal bidness ain't going anywhere soon....

Well, the stock took a big fall today, and based on this pattern, there could be plenty more room to fall.

Indeed, some of the put options on this went up literally thousands of percent. Not bad!

On a more bullish note, another stock I've been mentioning as a beautiful buy is ONT, and it continues to do terrific. Check out the strength of that volume!

Because the market is so complacent right now, many puts are being sold on the cheap. Check out this chain from earlier today for MMM. Just look at the October put. For 63 cents (if you strip out the intrinsic value)......63 cents per share!......you get the right to sell the stock at a fixed price of $95 any time between now and October. Even more interesting is the fact that time premium is just about zilch.....July is the same as June....is the same as October! Incredible.

The Major Market Index ($XMI) does a nice job of showing where this market stands. If - - and I say if - - the market even freaks out a little at the morning's CPI, tomorrow is going to be a fantastic today. Today was really good, only because I was running around buying puts when the Dow was up 50 and everything else was basically stalled. I knew it wouldn't last.

I've got to blast off to a meeting, so I'm just going to throw you raw symbols now, all of which I have either puts on or I am already short. Here we go.....AKAM:

BEN:

CROX (can you say fad?!!?!):

CRR:

DE:

EWM:

INFY:

MMM:

RIMM:

WHR:

Weekend Reading

2007-05-11T14:26:00.000-07:00

Denied. Again.

Yes, as I mentioned yesterday, the risk of the markets bouncing off their trendline was definitely there. The inflation rate (once you take away such non-essential luxuries as food and fuel) was low, and more signs of a worsening economy (anemic retail sales) had the perverse effect of pushing the markets higher.

So today might have been a turning point, but it was example eight thousand and twelve of false hope (e.g. yesterday's short, sharp shock).

It's hard to tell which way is up anymore. You could look at the Russell right now (intraday graph) and make a good argument for yet another bounce which is just getting started.

Using the same graph, you could also show a very plausible dome, indicating a market topping. Search me. After 11 months of banging my head against a wall, I'm as open to suggestions as the next person.

I'm going to have a lazy day and offer you some good weekend reading. Most of these links came from thoughtful readers, whom I would like to thank. I always welcome interesting reading, so feel free to post links in the comments section as you come across it.

Liquidity Boom and Looming Crisis from Asia Times

A Bear Market This Year? by Sy Harding, who also wrote this

The Great Crash of 2009 from the Interactive Investor Blog

The Bubble Hall of Fame

Dancing Bears