Grinding the Gears

I appreciate everyone's patience while I got my entry done for the day. I went on a whirlwind adventure to Florida to speak (five times) at an investment conference.

Many people were asking me about my book. You can buy it from Amazon right now, and I imagine it will be in your local bookstore within a few weeks. I see it's zoomed from #400,000 to #3,800 in just a couple of days. Harry Potter, look out!

I was really disappointed in the market on Tuesday (yesterday). It started with a quick drop, and then it punched and clawed its way back up to another lifetime high on the Dow.

The bulls are ungodly powerful right now. The reason is simple. This entire basis for people buying into this market is no different than the reason any six year old offers for doing anything..........."everyone else is doing it!" And that kind of sheeplike behavior has been creating graphs like that of the Dow Composite, which is straight up, grinding higher, and higher, and higher, annihilating us poor bears the entire way......


The Dow, which fell nearly 50 points today, continues to offer a flicker of hope for the ursine among us.


The S&P 100 likewise shows a continued reduction in upward momentum as viewed via the RSI.


Today I'd like to offer a mix of both short and long suggestions. As always, check them out more deeply for yourself. Let's start with the shorts. BP, mentioned here a couple of times, pushes closer and closer to breaking its huge head and shoulders pattern.


Carnival, also a repeated mention, looks better too.


CNX is another short energy play, in spite of recent strength in the OIH.


EXC seems to have clearly broken its upward trendline.


Now let's break tradition and pull up some bullish ideas. The balance of today's post is bullish suggestions. Starting with Genentech (DNA), where I've highlighted some similar patterns in the past and their subsequent upward breakouts.


FedEx, moving on to new highs.


HOLX also looks good, and has strong volume backing up its breakout.


IPS is also good for aggressive bulls.


The trouble I am having with conjuring up bullish ideas is that it's tough finding safe bullish patterns in a market this high. I could point out plenty of momentum plays, but I'm not really into taking advantage of the Greater Fool theory.

Good night, and I'll see you after the close Thursday.

Crazy Train

Time for a shameless plug. My book is rolling off the press right now. You can click here to go to Amazon if you'd like to pre-order a copy. I paid my way through college writing computer books, but it's been a very long time since I've had the thrill of seeing something I've written in a book store. I hope people enjoy reading it as much as I enjoyed writing it.


I've drawn a channel representing the NASDAQ 100 (which, in spite of a really strong general market today, is relatively weak). As you can see, we remain very much at the high end of this channel.


I've pointed out the huge divergence between the major indexes and their RSI. This holds true for $OEX as well.


Tomorrow is going to be really important. If we fall tomorrow, today may have been nothing more than a retracement. If we push higher, than we're probably looking at the umpteenth time that the bears have had a little hope injected into their system only to have it ripped away. Today's rise can be explained away. Any more rise could not - - we'd have to concede to the bulls yet again.


Capital One (COF) is still a possibility, even though it's holding up far longer than I ever expected.


John Deere (DE) remains at the high end of its channel, and it actually fell a bit today, in spite of a very strong Dow.


HealthNet (HNT) is approaching both its former high as well as the upper range of an upward-sloping trendline.


Interactive Data (IDC) has a rather toppy looking pattern and is worth a look.


Like I said, tomorrow is key. It was a very tough day for the bears today. Let's see if hope gets yanked away or is allowed to linger just a bit more.

Yep

Thus ends another week. Now c'mon, folks, throw me a bone here - - I mentioned CRR just a few days ago as a bullish play ("For a bullish play, CRR looks like it is beginning to turn northward after a long slide.") and it climbed 40% in just a few days. That isn't bad, and it shows this isn't just an all-bears blog.


The Gold and Silver index is looking like a potential short.


Although the Transports broke above their descending trendline, the shooting star candlestick today is a little encouraging. The markets are sky high and simply seem able to propel higher each week.


The $OEX (S&P 100) is matching a recent high. This means either a double top or, with more strength next week, more kudos for the bulls.


I like the Morgan Stanley Tech Index ($MSH) as a place to buy puts. It's pretty risky, and the puts aren't that thickly traded, but the potential for a big reward is there.


The Dow 30 lost a little ground today, and it remains clearly beneath its broken trendline.


Check out NVR versus the Fibonacci retracement. I'd say it's ready to turn tail.


China has been going absolutely hyperbolic in equities. GCH is a short play on this. But what's more fascinating to me is how well it has played against its own Fibonacci lines. I've highlighted the "bounce points."


Cabot Oil and Gas (COG) looks like another relatively low-risk place to buy puts.


I sold my Cummins (CMI) puts at a profit a while back. The stock has recovered since then, and it's so close to a double top at this point that I'm ready to leap in again.


Good weekend to one and all.........

Stalled Bull

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

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


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


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


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


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


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


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


FCX:


ETR:


Camden Property Trust (CPT):


CKH:


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

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

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!