Finally!

At long last, the Dow did not go up today. A one-day respite, at least, from the torture!

A lot of people are responding to the poll I posted earlier today. For those that haven't responded yet, please do so.......

Should this blog allow anonymous posters or require registration?


What's the one thing you'd like to see that would improve this blog?


What kind of trader are you?


Thank you. I've been watching the results accumulate today, and it's very informative.

All eyes have been on Asia, particularly since the 2/27 blowout. People are wondering when the mania is going to end. God only knows, and He ain't telling. Here's a graph of Malaysia. I mean, these aren't magical fairylands, people. Have you been to Malaysia? I have. I think it's a hole, myself. But then again, I'm an Ugly American.


Even though we haven't crossed the fabled 13,000 mark on the Dow, the press is already impatiently looking for the next big milestone. ''We could be looking at 14,000 by the end of the year,'' said Robert Froehlich, chief investment strategist for DWS Scudder. Yeah, fine. Whatever.

Anyway, the S&P had a touch of weakness today, but notice how it stayed perfectly above its former resistance level. In other words, now that line represents support.



The Morgan Stanley Tech Index looks like it could fall badly, but unfortunately, the spread between the bid/ask on these options is wider than Rosie O'Donnell's underwear. (I wonder to myself just how long people will pause before clicking that link.)


A couple of cautionary tales for you. First - - - American Airlines (AMR) appears to be a lovely head and shoulders pattern.


But look at Continental Airlines (CAL), which I was mentioning as a short for the same reason a few weeks ago. It pushed above its neckline twice. And then - finally - started to fall. All I can say is that, because of this, AMR doesn't' excite me as much as it might, and this serves as a reminder of the importance of stops.


Another cautionary tale. The stock ONT looks like a honey of a buy. I've mentioned this before. Great volume. Great price action. All the right moves.


Let's look back a few years, though. A similar situation with the same stock. Let's presume you jumped in and bought a bunch of this.


What happened next? The technical term is that the stock farted around for years to come. In fact, the aforementioned farting was down at a substantially lower price. So although the burst above the saucer was great for those who got in early (and got out), it wasn't so hot for the buy-and-holders. And that's not because the market was bad in general. On the contrary, the market was very strong.


Capital One (COF), which I mentioned as a short countless times earlier this year, continues to fall.


Lehman Brothers (LEH) has a fascinating interaction with those Fibonacci fans. Investment banks have had huge runs up (yes, yes, I got blown out of GS) but this is worth watching.


As for Southern Copper (PCU), I think one glance at this channel would suggest that, no matter what your viewpoint on the stock, we're certainly at the northern end of this channel.


Check out Potash Corp (POT). That's quite a shooting star, yes? A short on this with a stop price just above the high today may pay off nicely.


Finally, Schnitzer (SCHN) continues to act bullishly. I'm including its former breakout from years ago to indicate what a handsome move this stock has made in the past from a similar breakout.


I'll post the results of the poll tomorrow and indicate what, if any, changes I'll be making to this blog based on your input. Thank you!

Loving the Lump

Yesterday I wrote....

I was hoping for a nice nasty surprise from RIMM, but they had blowout earnings and their stock is way, way high in after hours trading. I wouldn't drop dead of shock if they ended the day down tomorrow. It's just a hunch. Maybe a completely stupid hunch, but a hunch nonetheless. I'm hanging on to these March puts.

Well, well, well. The hunch was right. RIMM was in record high territory after hours yesterday. Once reality started to sink in, the gains diminished, and the stock fell on the day. Let me be clear here: for a stock to go down significantly on a day when blow-out earnings are reported, blow-out projections are made, and record highs are made prior to the open........well, sweet dreams are made of this.


I also still like the look of MCK. Maybe my hunches have a bit more credibility now. Plus the Fib fans.


Bank of America isn't going to have a Google-sized (anticipated) fall. It's a major bank, after all. But I think the best days of this stock are through.


$XAU has a lot of room left to free-fall.


And although I'm not in an $MSH position (I'm in $NDX), this is a good prospective put purchase. Very toppy.


This has nothing to do with trading, but I loved the Lisa Lampanelli bit of the William Shatner roast. As a lifelong Trek fan (of the Original Series......please!) I found the entire event a kick. You froo-froo types, don't bother. But if you want a good laugh and don't mind the raunch, here you go.....


Oh, and Merry Christmas, everyone. Let us look forward to a year of delivering lumps of coal to bulls - both naughty and nice - in the year ahead.

The Stalemate Continues.........

Twelve stinking points. That's all that got lopped off the Dow after the Fed announced no change in rates (as everyone expected) and that inflation was indeed still a concern.

The intraday chart below shows what happened. After a nice pre-announcement drop, people sort of clung to their chests until the announcement, at which time the market did its usually insane up-and-down which-way-is-up madness. Most of the day's earliest losses were wiped clean.


I took a snapshot of $MSH earlier in the day since I thought it was worth considering as a short. Keep it on your radar screen.


The $OEX is sporting a big ol' hanging man for today. These don't happen that often. Just try to find another one that's even close on this chart. These usually suggest tops. Of course, we're in a market where bad news is good news and good news is great news, right? So - - the hanging man will probably muscle the noose off his neck, jump to the gallows, and start twirling around with an exciting Up With People dance.


As I've mentioned, the Transports are the only really bearish index with us, and it continues to behave nicely. Thank you, Mr. Rail.


Just to get an idea of the quagmire the market is in, look at the American Stock Exchange Major Market Index. Four days in a row of virtual carbon copies. Booooooooring!


I haven't shown my positions in a while. I've trimmed this a lot from the days of holding eighty positions! I'm much more into cash now, as this market continues to idiotically lurch higher.


Now - some individual stocks. Conoco (COP) seems to be a safe bet, as it is at the top of a well defined trading range. As always, though, upside breakouts can and do happen! So be careful.


This one isn't a short or a long - just kind of a puzzler. One of the strongest stocks lately has been Campbells. That's right - soup. Consumer Defensive plays are all the rage, I guess. I guess I've been in the Silicon Valley too long. I find it curious how people can get all excited about someone who puts alphabet soup into a can and sells it for 79 cents.


Google (GOOG), one of my more speculative put positions, is weakening a touch. Using my employer's "three arrows" method, we can see here that we've got a triumvirate of down arrows.


Goldman Sachs is my favorite investment bank short right now.


Heinz is another one of those "huh?" stocks, like Campbells. Ketchup. I guess it's all the rage.


MDC has retraced to its neckline nicely. I don't love this enough to make a position out of it, but it's well worth considering.


Merrill Lynch is a sky-high pattern which I've also secured as a short position.


Meritage (MTH), mentioned here many times in the history of this blog, has also retraced to its neckline.


I have not touched OIH for a while. I had a great time with it during the summer. It seems to be at a real stalemate right now. We're all just watching it for a breakout in either direction. I am guessing down. Surprised?


Fred Hickey is one of the few gurus I really enjoy reading. He had a really interesting mention in this week's Barron's where he was slamming tech stocks. One of his short recommendations is one on which I own puts, Research in Motion (RIMM). The article says, in part:

"In an echo of the 2000 tech mania, the analysts covering Research in Motion don't seem to be fazed by the fact that its market cap is now up to $26 billion, or 11 times sales." He notes, in contrast, Motorola (MOT), the cellphone giant and a key competitor, with sales of $42 billion, versus $2.4 billion for Research in Motion, yet its market valuation is only two times larger and 1.3 times sales. Palm (PALM), another competitor, sells at less than one times sales. Fred's calm assessment: Research in Motion's "valuation is certifiably insane!"

Lastly, Tesaro (TSO).


On what can we pin our dreams next? Crappy retail sales? That's tomorrow morning. Hope springs eternal in the bearish breast!

Five in a Row

Five down days on the Dow in a row. Nice. Let's hope for a sixth tomorrow. A solid week of downers would be sweet. Of course, all eyes are on the election next week. The market can have perverse and surprising reactions. A huge victory for the Dems would supposedly damage the market. But let's remember Clinton's 1992-2000 tenure wasn't exactly bad for stocks.

My $MSH puts are slowly gaining strength. There's a lot of room to tumble, but there's no earnest downward momentum yet.


The same holds true for the Russell 2000 ($RUT). Today's "spinning top" candlestick pattern indicates uncertainty.


For anyone bearish on gold, check out AEM. It looks really vulnerable to a swing down.


FCX is a great put play, since it's got a tight stop and there's so much room on the downside. Plus the supporting trendline seems to have been pummelled into irrelevance.


HYDL is a honey of a head and shoulders pattern. Full retracement has been completed.


Retailer Nordstrom (JWN) has decidedly busted through its supporting trendline and is high enough to be a relatively safe play.


lufk


The fog will hopefully clear by next Wednesday. Thanks for taking the time to stop by.

A Momentary Dose of Reason

Keee-Rist. It's about flippin' time. The Dow fell 73 points today, after going up for the past 1,342 days in a row. Earlier in the day it looked like another "drop and pop" session where we'd have another new high. Not this time. Some people with triple-digit IQs are actually getting a tiny bit of press and a few people are paying attention. Of course, any fall in the market which doesn't last for months on end will simply be labeled profit-taking.

If the market does ever get around to being sensible and falling for a while, one juicy thing for us put-owners is that the intrinsic value and the volatility premium will go up. The $VIX is at nearly the lowest level in human history. Just look at how much higher it was in June (ahhhhh, now those were good times).


We're just going to look at some indexes today. You guys have seen enough stock charts.

The NASDAQ hasn't been as lusty as the big caps lately. Here's the NASDAQ Composite. It's not in any clear technical formation per se. But at least any short position would be stopped out promptly, since we're so near multi-year highs. In other words, the "I must be wrong for now" levels are not far away, so the risk is pretty low.


The Morgan Stanley Tech Index (which I affectionally call "mush" based on its $MSH symbol) has thinly-traded puts. Indeed, I am the open interest on the options strike that I own. Considering the massive amount of overhead resistance, this could be a fantastic triple top.


Here's a somewhat long view on the S&P 500. Those diagonal lines you see are Fib Fans. Back in mid-July, when I said we had bottomed out, I wish I had the foresight to look ahead to just how far we would have climbed. I'm afraid the bearish goggles I was wearing didn't let me do that. But I haven't changed any of these studies. They clearly permitted the index to push its way this high. But it makes sense that it's reversing at this point. There's a ton of reasons for it to turn now.


The Transports have not been confirming the Dow Industrial highs. This shows a clean progression of lower highs. Not good for the bulls out there.


The Gold & Silver index ($XAU) could go either way. I bought puts on this today, but I've got a really tight stop at about the $141 level. This isn't a head and shoulders anymore. But it could still blow through that lower resistance level to the next line down.


Check out the ungodly high RSI on the $XMI. Total nosebleed territory.


I really hope next week brings us more of today (and less of the prior four days). The economy is weakening. That's not speculation - that's a known fact. The housing bubble is shrinking. I think a comment I saw on this blog Wednesday represents the bullish mentality: "Forget about nuclear weapons and all the other turmoil for now and just enjoy the ride upward." That's crazy. My view is that the market is going to get crushed, and I want to make a fortune in the process of watching everybody else lose theirs.