Earnings Season Begins

This week kicks off the Q1 earnings reporting season, and finally we can focus on the real basis of stock value - - earnings - - instead of obsessing whether or not the Fed will adjust rates or not (which, to me, is the most bizarre obsession imaginable).

Last month in my March 19th posting I mentioned American Home Mortgage as a good short play. Last Friday, a market holiday, they dropped an earnings bomb, and today the stock was down over 20% at one point.

What's fascinating to me is how, once again, Fibonaccis predicted a resistance level. The 23.6% Fib level for AHM is $22.43. Today's high price.....$22.45. Remarkable!


The S&P 500 is sporting a neat little shooting star today. Nothing dramatic, but at least the market closed well of its highs. This market's rationale for pushing higher is getting weirder and weirder. I saw a headline today which said - I'm not making this up - "Market Rises on Interest Rate Worries." Huh? So let me get this straight. The market goes up if interest rates are believed to be going down. And now the logic for going up is that they might go up? Insane.


Google (GOOG) is acting pretty interesting lately. I bought some puts on this one today with a stop price of $484.25


As big as IBM is, I'm not sure if I've ever mentioned it here. As you can see, in spite of the steady rise of the price for the past five weeks, the volume has been getting more and more feeble. Hardly the stuff of great bullish plays.


JC Penney, purveyor of the country's finest fashions, is a candidate for shorting here as well. What I love about these huge, relatively slow-moving consumer companies is that you can usually pick up the deep in-the-money January 2008 puts for the same price as the August 2007s!


Lastly, the NASDAQ 100 (QQQQ), which has the advantage of penny-priced options, closed its February 27th gap perfectly today. The low just prior to February 27th was 44.74. The high today.....44.73. Picture perfect.


For some reason, a lot of people wrote me directly over the long weekend. I received many interesting notes - - all but one of them very friendly. In fact, one of them is so interesting I might ask permission of the author to discuss his theory.

Thanks for taking the time to stop by. See you tomorrow afternoon!

Contratrend Rally

Today was a pretty bad day for the bears. I woke up to find myself stopped out of my S&P and Russell index puts. I only got stopped out of a few equity/other put positions, but suffice it to say it was pretty much red across the board for me today.

I don't comment much on the FX markets, but I just wanted to share a chart of the USD/CAD ratio. To me it looks like the multi-year slide of the USD/CAD may be behind us. The succession of lower lows and lower highs seems to have changed to higher highs and higher lows. I've tried to make this clear with the circles and arrows.


Speaking of FX, one item I follow fairly closely is the New Zealand dollar. The NZD/USD pair gave me a clear signal before the February 27th selloff. NZD has been rather strong lately, but I think it may have exhausted its ability to climb back up. A resumption of the sinking of this FX would be very positive for equity bears like myself.


Is there a VIX on the VIX? If there is, it must be going crazy. Just look at how volatile this thing has been, swooping between 14 and 20 like mad. Today's very strong market took a lot of steam out of the VIX.


The principle risk the bears are facing right now is if the markets show much more strength, they are going to push into a relatively "all clear" zone where the bulls and frolic for a few weeks. I've tinted this in green.


The NASDAQ is even a prettier picture for the bulls, since it seems a short term double bottom may have been hammered out, and there's plenty of open sky above current levels.


The Russell 2000 - which is a favorite of mine since the bid/ask is relatively reasonable on the puts - has been strong compared to the more narrow indexes. A tight stop on this would be $789.88 with a somewhat fatter stop being 797.45.


Same story with the S&P 500. We've been in a trading range for the past couple of weeks, and things will look bad for us bears if we break above it.


Although people may think the sub-prime story may be fully told, I'm not so sure. I bought puts on AHM today. To me, this looks like the beginning of a much larger fall. What's freaky about these puts is that I actually picked up the June $35 puts for less than the April $35 puts were priced. Bizarre.


RIMM was about the only bright spot for me today. For RIMM to fall in a market this strong is encouraging. Breaking below $131.18 is key.


And now your occasional video clip. One of the most unlikely scenes from "The Facts of Life" known to man. Beyond the pale. Enjoy.

The Wow Starts Now

I read today's trading described as "erratic." That's an understatement. It was a madhouse. For most of the day, it seemed that the market wanted to freak out the final weak hands. But as if that weren't enough, at the final portion of the session, the daily lows were cracked, and the market plunged even further. All of which makes me angrier at myself for the $350,000 in profits I walked away from less than a week ago.



Those of you who took advantage of my New Zealand suggestion (made precisely at the top), send me some flowers or something! I mean, I nailed this thing totally on the head. Little did I know that this currency flux would be driving a worldwide plunge in equity markets.


Part of the freak-out today was from the continuing damage caused by feckless "flipper" real estate twits. Just take a look at sample financing company getting trashed.


My suggestion on BP continues to do well.


And Carnival, purveyor to obese, bored "travelers", continues to fall as well, as I've mentioned it would many times.


Take a look at the Fibs on the Greater China Fund. Looks like we're in for a bounce, doesn't it?


Lehman is just one example of many of stocks that seem to have had the air taken out of them but are reaching support levels. In this instance, based on Fib fans.


Another victim of the housing collapse - MTH. Once again, a short I suggested many, many points ago.


But today was just maddening, as I said. Look at SPY. The horizontal line shows what I thought would be the support level. In the morning, we started bouncing higher (as I imagine we will tomorrow morning). All day the market farted around. And then, as shown by the highlighted area, we got whacked.


One long idea for ya - UNP.


I've got to scoot. My equity puts have been doing fantastic. But I'm a complete moron for selling those index puts. Ugh. What a rotten feeling. I can only hope we get a nice fat bounce so I get a second chance. *Sniff*.