Melt-Up

Well, it finally happened. We broke out of the consolidation that's been grinding along for six weeks now. The action was just bizarre. I suppose shorts were getting squeezed left and right, and bulls were jumping in with both feet. It was like an orgy of buying.


Based on traditional technical measures, the target for the Dow at this point would be 14,100. I'm not saying it will necessarily get there, but this has been a really clean consolidation, and it seems a sensible conclusion. Particularly given the strong psychological import of the Big Round Number 14,000.


My index-of-choice for puts, $RUT, wasn't as strong as the other indexes, and luckily I was kicked out of my puts the moment the market opened (sparing me most of the day's strength). The high price of 856.39 is awfully close.


Looking at a long-term S&P 500 chart, you can see the index is approaching its lifetime high reached nearly eight years ago.


Now, a moment about the comments section. I totally expected the bulls to rip off their bras and swing them over their heads today - - that's fine, because I would be just as obnoxious if the Dow was down 283 points. There's one particularly poster who doesn't crawl out from under his rock very often, but when he does, his posts are little more than hate and vitriol (he is hiding behind a screen name, but his name is Ryan and he lives in Phoenix). I look forward to being on a new blog platform where I can block sub-humans like this.

In the middle of 1999, Newsweek proved once again the "cultural saturation" rule by having the cover below. The market still had six more months of climbing before it started eroding (not going into full bear mode for another six months after that), but it definitely was a signal of a looming top.


A new best-seller reminds me of the same cultural phenomenon. I actually picked up this book a few days ago and am looking forward to reading it. I guess I'm a frustrated sociologist.


The $VIX has been beaten back into submission again. I'm surprised how cheap puts are these days. I am seeing lots of November puts that are priced no higher than August puts - - - time premium seems to be about zero for some stocks. In most cases, I am seeing in-the-money puts that are barely higher priced than their intrinsic value. So they're basically giving them away.


Apache (APA) is a pretty promising bullish pattern.


And Blockbuster (BBI), which I've mentioned before, also looks bullish.


I think JC Penney (JCP) is at or near its full retracement today. I'm ready to jump into puts on this one again.


There are three stocks that look surprising flaccid given today's action. The first is Baidu (BIDU), which is part of beanie's bombast.


The second is CROX - - I admit, I see the shoes everywhere (ahem - I only wear Eccos, in case you were going to send me some shoes) but I still think it's a fad stock.


And finally, Google (GOOG). For a stock like Google to go up 0.16% on a day like this is pretty lame.


Today's rally was supposedly prompted by strong consumer spending. For a real view of American Consumerism, enjoy this clip from George Carlin - - the portion on consumers starts at the 4:00 minute mark.

The 7/4 Push

A number of readers have been remarking how strong the market is prior to the July 4 holiday, and how bears should sell into this strength as opposed to shorting too early (like last week). If today is an indication, it seems that was good advice. The market was strong across the board, with the Dow posting a better than 125 point gain.

My index-puts-of-choice are for the Russell 2000. I've got a pretty big put position on this index. As long as the series of lower highs and lower lows stays intact, I'm fine with this.


Remember, tomorrow is an abbreviated trading session (the equities market closes at 1:00 EST, three hours earlier than normal), so it's bound to be a quiet, low-volume today. I would think most of the pre-July 4 fireworks got taken care of today, but there might be another little push upward. The S&P 500 is also in a "lower highs" pattern, and it needs to remain so in order for the short-term bearish picture to remain decent.


One nice Dow stock for puts is Alcoa (symbol AA) which looks to be in the latter stages of a head and shoulders formation.


For big believers in the continuing ascension of energy prices, APA looks like a good bullish play. This is a really nice saucer breakout.


PSB is a short I closed a little while ago with a nice profit, but I re-entered it today, since it seems to have finished with its retracement.

How Now, Mao Dow?

There was a time, not long ago (like, ummm, early last week) that I would have felt cheated and flustered by the Chinese market's tumble not having a bearish effect in the U.S. But at this point, I am so utterly distrustful (and numbed) by this market that I'm not at all surprised.

The Shanghai index fell the equivalent of over 1,100 Dow points last night, and our market - of course - went up. I truly believe - and I am seriously not exaggerating - that a nuclear bomb on a major city would not cause a major disruption in this bull market. I swear to God, this market is insane, and even the death of a million people would not stop it. It has lost its mind.

So. Having said that, let's look at a few charts.

Crude oil is pushing higher. Looking at the continuous futures chart, it seems to have plenty of room on the upside.


The strength in crude is obviously good for oil service stocks. The OIH is at a new lifetime high and had a very strong day today.


I mentioned last month how bullish energy looked, and stocks like Apache (APA) have been stars.


Conversely, companies which suffer due to high fuel costs got hurt today. My short recommendation of American Airlines (AMR) is doing well.


One I don't think I've mentioned in the past on the short side is BEA Systems (BEAS).


I have, however, mentioned Bunge (BG) a few times, and this one is shaping up nicely.


Capital One (COF) is sort of stuck right now. I own puts on it, and they haven't done a thing, but I am still hopeful about this position.


Federal Realty Trust (FRT - "don't giggle at our ticker, please") looks like a clean bearish trade to me as well.


I don't mention Google (GOOG) much, but this stock looks like a strong buy (yep, buy). This chart is strong, and the volume has been inching higher. Obviously this company is an ungodly powerhouse and is doing well at the expense of poor Yahoo, which seems to be dying an agonizing death.


I bought puts on Honeywell (HON) today. Maybe a lil' double top here.


The investment banks seem to be edging south, in spite of the market's continued strength. Merrill Lynch (MER) in particular looks good for a short play.

The Price of Tea in China

Unstoppable. The bulls are simply unstoppable.

As you know, before the market opened this morning, it was greeted by the news that China's stock market had fallen more than 6% (that would be like the Dow falling over 800 points here). Naturally, our markets opened lower. And they spent the day pushing higher.

To a new record close.

The Dow's at a lifetime high. So is the Russell 2000. And, unless I'm mistaken, so is the S&P 500. It's enough to make me consider renaming this blog The Wall of Worry.

In a balls-out bull market, traditionally bearish patterns get squashed. The chart below is a good example. This is a great-looking head and shoulders pattern. Or at least it was, as indicated by the highlight. But the market doesn't care. It's simply too strong, and this pattern - as with so many others - has been neutered.


I am buying energy stocks, because they are just about the only bullish charts that look like they have firepower behind them, as opposed to just being momentum plays. Here's Apache Corp (APA). Notice the good surge in volume on today, a very good "up" day.



Much the same can be said of Southwestern Energy (SWN).


That's about all I have to say today. This is just getting to be a bit much!