Energy's Strength

It's true - the market (as measured by the Dow 30) was up for the 8th day in a row today. This hasn't happened since 2003. So the press is all over that.

Less touted is the fact that today, for instance, the Dow was up all of 4.71 points. In percentage terms, that's the equivalent of a person with a six-figure income rushing home to tell their spouse their gross salary is going up $37.45 per year. Whoo hoo!

One quick note on American Home Mortgage (AHM) before we get started in earnest..... the stock continues to tumble. The tough part - and this is always much tougher than picking out opening positions - is when to close it. I took a look at a long-term chart, and the next really meaty support level is literally in the $6.50 to $7.00 range. Does that mean the stock will go that low? I have no idea. But this short position looks even better today than it did yesterday.


As for the market in general.....same story from me. Take a look at the DIA graph below. The bulls just keep wrenching things higher, but we're still below that busted trendline. Looking at this one graph, it seems the bulls are losing steam. But we know how easily they can recharge those locomotives, don't we?


I've been impressed and surprised by the strength of energy stocks. I have a substantial investment in natural gas fields, so I'm happy to see NG prices creep higher. But my feeling a few days ago that oil stocks were topped out was off the mark.

What's tough about buying into hot stocks is that it's difficult to see them going higher. But they often do. Here's a great example....Entergy (ETR), shown below, had pushed into a new high of about $78. Not that many months before, this has been a stock trading in the high 20s. It's hard to get excited about getting into a stock that has risen hundreds of percent like this.


But look what happened after the breakout (shown with the same horizontal line). This sucker just kept climbing. I admit that I am lousy about getting into stocks pushing into new highs.....it just seems too risky. But the fact is that this is how fortunes are made. Technical breakouts on strong volume often indicate many more gains ahead.


But when thinking about energy stocks, it often helps to at least have a passing awareness of what the commodity itself is doing. The main one, crude oil, has a long-term chart shown below. Obviously oil has had an amazing push skyward since the late 90s, blasting off about 600%. I'll leave it to you to decide where you think oil might go next. I truly have no strong opinion.


Looking closer, it could be argued that there's a head and shoulders pattern in the recent history. Not a textbook-beautiful one, but a visible one nonetheless. That would suggest future weakness. But, again, I truly have no strong view on where energy prices might be going.


Having said that, here are a few energy-related stocks with impressive charts. Dril-Quip (DRQ):


Schlumberger (SLB):


And Questar (STR).


A couple of mentions that are not directly energy-related.....first, I got bounced out of Continental Airlines (CAL), but I'm still eyeballing it. I've inched the neckline up a bit to accommodate the price move. This is not as clean a pattern as it was, but it's still worth watching.


Lastly, Sears Holding (SHLD) continues to be amazing (for bulls). I've mentioned this beautiful cup with handle pattern before. I have no position in it now, but if I were long, I would be delighted. This is an amazing-looking chart.


That's it for today. Let's hope the market gets a little more interesting soon. Otherwise, we'll have a 9th up day in a row, and it'll be +0.35 on the Dow.

Grind It Out

I know a lot of you spend a lot of time worrying about a gift to buy me, particularly since no one was able to come through with a C3PO tape dispenser. I will welcome this surprisingly frank Batman water pistol in its stead.


And for your daily Unlikely Juxtaposition of Books, I offer this snapshot I took in my local Borders bookstore. It's not crystal-clear, I realize, but on the right of this New Non Fiction selection is Hillary Clinton's "It Takes a Village" retread, and on the left is a book about sexual pleasure for women. I'm surprised one of these books did not leap to the floor under its own power.


Oh, yeah. Charts. I almost forgot. Today was one of those grind-it-out bore-fests where the markets.......how do the rah-rahs say it?........oh, yes, "digest" their gains. This still falls in line with what I was looking to unfold: specifically, the end of a full retracement before the fall resumes.


The daily candle yields a similar picture. Notice the spinning top today. I've marked another recent spinning top, which happened to be at the very peak of the market.


All the charts that follow tell the same story, so I'll just net it out for you here: (1) plunge after 2/27 (2) consolidation (3) turbocharged retracement to approximately 2/27 levels. My speculation, and where I'm putting my cash at this point, is that the markets will resume their fall. The rest of today's entry will be little more than tickers and graphs. Here's the gold and silver index (XAU):


AHM (part of the sub-prime world):


BAC (a huge bank, but a beautiful chart nonetheless):


Bear Stearns (BSC):


Continental (CAL), mentioned countless times here, having completely a lovely head and shoulders retracement to the neckline.


Brazil iShares (EWZ):


Goldman "nut" Sachs (GS):


PSB, part of the commercial real estate crowd:


Oh, speaking of Hillary......your video of the day. This is what all the fuss is about regarding the repurposed "1984" commercial. Hearing her nasal voice patronizingly talk about "conversation" this and "chat" that is truly nauseating. Anyhoo........enjoy:

The Return of Sanguinity

First off, for those of you who can't quite get your fill of me in this blog (OK, that would be the empty set.....) there's a short interview published today you might find of interest.

It hasn't taken long at all for people to have utterly forgotten about February 27th. The $VIX has come full circle, sinking to levels not seen since the big break on that (not-so) fateful day. It seems the bulls are ready to party again. By the end of day tomorrow (post-Fed announcement), some of the smoke should clear a bit.


Index after index shows the same thing - - that we are at the upper levels of the trading range established after the 2/27 break. As I said yesterday, if we push above this trading range, the bulls are going to feel rightfully emboldened.


The $RUT has been especially strong of late.


Take a closer look at the $RUT and see how nicely it is bound by two Fibonacci retracement levels.


Same story with the S&P 500.


A closer look at the S&P 500.......with a different, tighter set of retracement levels...shows again we're at the highest reaches of the recovery since 2/27.


Research in Motion (RIMM) inched down a bit more today, which is good. Also of note is Continental Airlines (CAL), shown here, which has done a perfect retracement to its neckline (and, interestingly, its trendline). A break down and away from this neckline would neatly complete the pattern.


That's all I've got for today. If we don't see weakness tomorrow, it's going to only amplify the discouragement, disappointment, and frustration of the bears who had thought their fortunes had finally turned with the recent market break.

The Price of Tea in China

I am writing this Wednesday morning, a few minutes into the opening bell. I stayed up until 2 going through charts and resumed at 5:20 this morning. So this is a late post, but it is in the context of Tuesday's mini-crash.

It has been a long, long time since I have awakened to such a beautiful sight on Tuesday morning:


In the end, Tuesday turned out to be the best of times and the worst of times. It was the best of times since it was spectacularly to finally see a real fall, just like I had hoped for the previous day (see my Monday post). It was the worst of times since, for my index options, I closed them out when the Dow was down just 120 points. I made money on all my options, but there was a huge amount left on the table. Deeply disappointing, but nice to see the smart bears beat the dim bulls for a change.


A few interesting notes from yesterday:

• I had a record amount of blog traffic. It's weird, because usually my traffic is very steady. Maybe my regulars came back repeatedly to see what crazy Tim was going to say. Or maybe those who visit me occasionally figured it would be a better post than most.
  
• A number of people wrote me emails to thank me for the profits they made. I appreciate that, but the credit goes to you! I'm just here sharing my thoughts, for better or worse. What you do with them is up to you.
  
• Quite a few people keep asking about the sales of my book (especially, strangely, my detractors). I have no idea! I do track its rank on Amazon, and it briefly made the "Best Sellers" list on the business books/investing section, but remember, this thing hasn't even hit any stores yet. It is just off the press. Only time will tell, but I'm pretty proud of my book. I think it's a good read!
  
• On a personal note, I've been waiting for the perfect opportunity to use the subject I chose for yesterday's post ("I Am Become Death"), a reference to Animal Mother in Full Metal Jacket. I felt it fitting!

I think few stocks better represent the broken promises of this fraudulent bull market that Google. What a snoozer this thing has become! Just look how it's been doing a whole lot of nothing since November. This is a relatively blue chip high tech stock, but you can just hear the air coming out of the tires.


If you look at the NASDAQ over the long term, you can see we might have a loooong way to go before we reach bottom.


Looking at the same index with a shorter time horizon, we plainly bounced off the upper resistance line.


The Dow Industrials were just crazy yesterday. I was - - and this is further proof of just not God, but a Cruel God - - trapped in my car virtually all of yesterday, taking dangerous glances at my Treo. The market was down 200 or so for the longest time, then it was suddenly down 500. I honestly thought the president had been killed or something. But it was just this orgy of sell orders all at once, I suppose.


Looking at the long term industrials, one could easily argue that yesterday was an anomaly. There aren't any major trendlines broken here. Just some very shaken bulls.


The Russell 2000, which I've mentioned quite a bit as a good index to buy puts on, took a better tumble than most yesterday.


And just look at the QID (and its volume!) It's pretty clear there is a growing interest in this double-inverse funds!


Looking at the $SPX, you can see a brief pause about half an hour into the trading day. This is the point where I - shame on me, shame on me - did an "ad hoc" close (which I had forbade myself from doing). Pure idiocy.


But here is perhaps the most interesting chart I have for you today - the SPX on a daily basis. Take a good long look at those trendlines that made up the channel, above which the index had broken out. And to which point did the index fall yesterday? That's right - almost precisely at the same trendline! If any bulls are ready this, you can take that as an encouraging sign.


The volatility index went stark raving mad. This almost certainly cannot sustain itself.


A close look at the $VIX shows the amazing breakout. This borders on unbelievable.


I had no position on the $XAU, but I wish I had puts on this bad boy. The plunge in China had a profound effect on metal prices.


Oh, and the Dow Transports breakout I mentioned last week as great news for the bulls now is rendered moot. The pattern has been shattered.


Continental Airlines has broken its trendline. I've pointed out the target on this. I own puts on this (which I bought prior to the breakdown), and I have high hopes for this position.


One other stupidity on my part - I closed out my CME puts yesterday at a fantastic profit. But the profit became much more fantastic as the CME kept falling. These expensive stocks can make for fantastic puts, especially when volatility is low (as it was not long ago!)


Lastly, Goldman Sachs - - whose puts I've been derided for owning - - is another winner. I'm hanging on to this, although I sold my MER just to trim my investment bank exposure. But you can see by the trendlines there's plenty of room left to fall.


I apologize again for the late post, but I hope I made up for it by the size of this one! Thanks again for all the congratulations and pats on the back. I'll let you know if any bullish Australians have left any cowardly voicemails for me.

Crossroads

Greetings from the snowbound tundra of the California Sierras. To me, the definition of civilization is anywhere with an Internet connection, so I'm still quite content.


Today was a good day, but I can't help but be concerned that we will have, yet again, another swing up. I'm not saying it's going to happen. I am saying that it seems to keep happening, and the most polite word I can think to describe this wave-like action is "annoying."


What we need, of course, is a clear, obvious, idiotic-comments-suddenly-cease kind of break in the market. Until then, I have reduced my exposure somewhat with the worrisome anticipation that this stupid market might find its legs once again. The $NDX at least had a nice bearish engulfing pattern today.


The $OEX shows a wonderful example of just how monstrous the divergence is between the price action and the RSI. This market is running on fumes. But there are a lot of people who like sucking those fumes. The bulls always radically outnumber the bears. We are a lonely bunch, aren't we?


The S&P 500 is just another example of this higher highs/higher lows market. In fact, to make matters worse, the lows don't seem to be dipping as low. There are some bright spots, of course. The investment banks are starting to weaken. Some issues (like the CME) are finally making some real progress downward. But others - like RIMM and MSTR - have surprised me with their incredible strength (obviously I got stopped out on these - I may be dumb, but I'm not an idiot).


The Dow Transports, which I've pointed out should be providing comfort to the bulls, is at risk of breaking its inverted head and shoulders pattern. This could be nothing more than a pullback. But if it falls much more, the very clear bullish pattern will have been neutered.


I mentioned Continental Air (CAL) before. The head and shoulders pattern on this is forming nicely. We could be seeking a neckline break in a day or two.


And although CRDN as a whole isn't an exciting chart to me, I was blown away at the size of this bearish engulfing pattern. This is like the John Holmes of these patterns - I rarely see them this big.


Accept my good wishes that the higher highs/higher lows pattern be broken in the coming weeks. The bulls must be conquered, and breaking the pattern is the first step in breaking their spirit.