Any Gas Left?

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.

Prophet North

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 Show Must Go On

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.

Love So Deep, Kills You In Your Sleep

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........

Indecision

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.

Thanks, Alan

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.