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

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........

Talk About the Weather

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.

Sheer Energy

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.

Four Hundred

Today is my 400th post (huzzah!) May God grant me the strength to see it through to post number 500. And smite anonymous phone callers.

The stock market these days reminds me of a celebrity. With makeup on, they can be very sexy and alluring. Without the gloss and shine, however, it can be a scary sight.


The S&P was somewhat weak today, as was the market as a whole. This was a nice relief, since a springback from Friday's weakness would have heartened the bulls. However, we have to cut beneath 1417 to break the series of higher highs/higher lows. Otherwise, we're just going to continue to waste our lives waiting.


The $VIX is, understandably, pushing higher.


I'm kind of "charted out" for now, so let me share just a few. At long last, some of the commercial realty stocks are falling. Here's sky-high AIV, for example.


Amlyn (AMLN) remains a favorite short.


I've mentioned BP a bunch of times. The head and shoulders formation - and it's a huge one - continues to form nicely.


CNX is also in a topping pattern with a very clear stop-loss price.


And although I have no position in NutriSystem anymore (NTRI), I would be terrified being long this stock. It's in a huge no-man's-land right now, and there is very little in the way of support between its current price and........I won't even say how low.


On to post 401! See you tomorrow.

Beyond Good and Evil

Well, the day started off well enough. A nice initial wallop. Regrettably, the markets clawed their way back up to end in positive territory. Chalk up "Mini Asian Financial Crisis" as yet another thing the markets can shrug off as irrelevant.

Speaking of financial disasters that no one seems to care about, the Financial Report of the United States Government was issued recently. It's nearly 200 pages, but here are a couple of interesting bits:

Despite improvement in both the fiscal year 2006 reported net operating cost and the cash-based budget deficit, the U.S. government’s total reported liabilities, net social insurance commitments, and other fiscal exposures continue to grow and now total approximately $50 trillion, representing approximately four times the Nation’s total output (GDP) in fiscal year 2006, up from about $20 trillion, or two times GDP in fiscal year 2000.

and.......

Given these and other factors, it seems clear that the nation’s current fiscal path is unsustainable and that tough choices by the President and the Congress are necessary in order to address the nation’s large and growing long-term fiscal imbalance.

I found the graph about the Medicare gap particularly interesting. I don't think I've ever seen a y-axis before which measures "billions" of dollars with figures such as $16,000 (e.g. Sixteen Thousand Billion - - otherwise known as Sixteen Trillion). Umm, we are hosed, people. Wake up!


AIV is representative of many REIT stocks, all of which are softening like butter on a midsummer's day.


BAC looks like the uptrend is over.


BLUD, one of my few long suggestions, is still looking mighty purty.


BZH, another long suggestion, seems also poised for a rise.


Although I'm uncertain as to where gold is heading, GFI looks potentially bullish as well. (Wow, three bullish mentions in a row.......)


MDC is easing away from its retracement nicely.


.....as is old favorite MTH.


Many people have asked me to look at QID. I own this now. It doesn't have much of a history to it, but it's a nice double inverse play on the Nasdaq. And check out the volume!


RIMM, which will give everyone a quarterly update after the close Thursday, is starting to slip-slide away again.


And SHLD, long-watched but seldom tried, is looking mighty mushy.


It was disappointing, of course, to see how boldly the markets fought their way back today. The bulls have had a dynamite year (and the dynamite was placed directly under our paws). I guess they're just going to keep pouring salt in the wound until Dick Clark's ball drops at year's end.