So Short, I Could Jump Off a Nickel

One of the readers of this blog commented last night: "If we have a down 3rd Friday, It’ll be the first one I’ve seen, in (well, in a second, as far back as….wait, I think I found it, … no wait, that’s not it, well.. Records don’t go back far enough." Well, we were down today 50 points on the Dow. Another good week!

Here's a daily graph of the S&P 500. I've put three moving averages on this index graph - a 50 day, a 100 day, and a 200 day. The big drop on February 27th sliced through the 50 day and the 100 day. The recover from that fall kissed the underside of the 100 day. And now it's falling again, pulling both the 50 and the 100 into a downward slope.


Here's something more remarkable to me. See that huge upward-sloping channel? Now take a close look at the upper line of that channel. Keep in mind I drew that channel a while ago. Take a look at what happened today on a minute-by-minute basis:


Do you see what I'm talking about? The arrow marks the place where the index bounced off the trendline virtually to the penny. Astonishing! Once again, this isn't a trendline I drew today. I drew it a long time ago. But now that we're back within the channel, the price is obeying this level splendidly.

A lot of people, myself including, have become hung up on the fact that the $VIX has become so "high" in a very short amount of time. Going from the single digits to 16 is a big move, to be sure. But step back and look at the $VIX over the past decade. The norm was for it to bounce between about 20 and 30, with occasional bursts above and (less frequently) below these levels. So a level of about 16 is actually way under the norm still.


Looking at the NASDAQ Composite, if there is any regularity to the broad action of the market, it seems we're still in the same sine-wave type pattern with plenty of room left to the downside.


The Dow 30 did a gorgeous bounce off the underside of the 100 day moving average. It seems to me the next target is to take out that red 200 day moving average.


Regular readers know of my fondness of the Russell 2000, particularly since the put options have a much more reasonable bid/ask spread than the S&P 500. A tight stop on this would be about $785.


The Major Market ($XMI) is another interesting graph. We've come full circle on the breakout. The downward momentum of this market doesn't seem like a fluke anymore. It feels truly bearish.


Most of the attention has been focused on the rinky-dink sub-prime mortgage lenders. Gigantic blue-chip banks like B of A (BAC) seem vulnerable now. Check out the topping pattern and busted trendline.


Black and Decker sports an interesting diamond-like top.


Purse-maker Coach (COH) has had a great run, but it seems to be history.


Google (GOOG) is not a slam-dunk bearish pattern, but busting that supporting trendline would cause some big fireworks. I personally think Joost is going to completely trash YouTube. I'd go so far as to say YouTube may go down as one of the stupidest acquisitions in modern corporate history. But only time will tell. It's great for the sophomoric videos I post here, at least.


MicroStrategy (MSTR) continues to have its steam leak out its sides.


And for today's video clip.......Carmen Electra's completely hilarious and unintentional pratfall at a fashion show. Chevy Chase could never mime something this good. Find some good Benny Hill-style music to play while watching this.

Engulfed

What is with this crazy market? Don't get me wrong; a triple-digit down day on the Dow is terrific. But this market is heading for the nut house.

Over the past trading week, there have been two instances of big bearish engulfing patterns on the $NDX. Today's was a whopper. Having a superstar like EBAY up in the double digits at the open and yet have a wipe-out like this is really encouraging.


The $SPX bounced off that resistance line beautifully. The market still has no direction, though. It's neither bullish nor bearish. Just schizo.


The rest are straight-up short ideas. AMX:


AutoZone (AZO), still in the stratosphere:


Carnival Cruise Lines (CCL), approaching resistance:


Black and Decker (BDK):


Goldman Sachs (GS), finally getting a reversal:


LLL:


NutriSystem (NTRI), with its cup and handle pattern failing:


RTI:


Sears Holding (SHLD), also weakening:


Now for your occasional clip of the day! The world's worst weatherman. Brace yourselves.

It is a Most Elusive Fish...

The markets were very strong today. At least I am not putting my foot in my mouth. I've made it very clear lately that until there's a clear "rupture", we're still in bull-land. Earnings season isn't doing a hell of a lot so far for our cause. It reminds me of a favorite movie clip of mine......



The Dow Jones 30, shown below, hit another lifetime high today. I wouldn't be shocked if we pushed all the way toward 13,000 in the coming weeks. Earnings from EBAY this evening have the stock up over 10%.


The S&P 500, while not at a lifetime high (its high in early 2000 stands unbeaten) is nonetheless at the very highest point of a massive ascending wedge. Looking at the charts tonight, it's obvious that the strength is widespread and devastating to the bears. (Goldman Sachs just being one of countless examples).


The only bearish holdout is the beleaguered Dow Transports. Of course, I'm sure the bulls will say Dow Theory is sad and outmoded and should be ignored.


If there are any living bears still out there, I like the looks of Adobe (ADBE).


...as well as Black and Decker (BDK).


For a bullish play, CRR looks like it is beginning to turn northward after a long slide.


Ryland (RYL) has recovered back to its neckline, although I use that term somewhat loosely since this isn't much of a head and shoulders pattern. All the same, with this much recovery under its belt, it makes going short the stock much less risky.


Much the same logic holds true for Sierra Health (SIE).


Lastly, I will mention one short suggested here, Textron (TXT), seems to be getting slammed in after hours trading. Nice to have one bright spot to anticipate for the morning!

Burying the Week

This was one of those days that the market went up but my all-short portfolio actually went up too. I guess I can make a good decision now and then.

I tossed out a 'Second Life' reference a couple of times, but hardly anyone said anything. Maybe I'll just give it a miss. Here's my avatar in case you happen to see me. No surprise, eh?


The market exploded higher earlier in the day, but a lot of those gains melted off. The market was still up (in most cases), but most indices are sporting a nice shooting star.


I've been short gold for a couple of weeks, and that seems to be heading in the right direction finally (as viewed via the $XAU).


I've taken a few stabs at Black & Decker (BDK). Finally it took a tumble! Just look at the volume today, too.


I remain long puts on Capital One. It's only inching down slowly, but I still really like this pattern.


I entered a new position on CSX today (buying puts).


GOOG is a bit of a fascination of mine. It's getting a little weaker every day. They will be reporting earnings in January. Obviously a disappointment there (as happened a year before) is the only thing that could really take the wind out of this stock's sails.


I'm also still short Goldman (GS), my favorite investment bank pick now.


HYDL is starting to behave well to the downside.


RIMM gives quarterly guidance next week on the 21st. The past couple of days gave RIMM some upside, but today's shooting star pattern gives me some comfort. It seems the market is saying, "oh, no you don't" to any sustained strength here.


I see a lot of quitters in the comments section. That's totally your decision, of course. Just try not to be rude on your way out the door. You may be back!