Spock Grok

I was going to write a huge entry today about emotions and the market. But it's already four hours after the close, and I'm still stung with guilt pangs from such a late posting last night, so I'm going to leave my essay for another day.

I will say, though, that I yearn to be like Spock during times like this. The problem with these range-bound markets is that, for a bear, (a) when at the low end of the range, I'm flush with profits, I'm totally committed to my positions, and I'm into way more risk than I should be since I've been doing so well; yet (b) when at the high end of the range, when I'm sacrificed some or all of those aforementioned profits, I'm skittish and risk-averse. Obviously being just the opposite would be helpful on both counts. Spock is a cool customer.


Of course, we're all only human, and markets run completely contrary to human nature. That's why there are a handful of big winners - - those that defy the greed/fear trap - - and the rest of us are just schlubs. Let's face it - emotions and the financial markets are just another example of one of life's bad combinations.


I haven't mentioned China in a while. I'll say this.........long term, I think China is going to be king of the world, or at least a prince. Whereas its neighbor Russia will, in my opinion, collapse back into socialism or communism within the next decade. My optimism for China's long-term prospect's aside, what we're witnessing now is a bubble, pure and simple, driven largely by embarrassing naievete on a greedy yet clueless investing public.


The Dow fell 148 points today. It doesn't mean much until and unless we break 13,250. If we do, I'll probably return to being the arrogant pr*ck you all love so dearly. Until then, my hands remain peacefully clasped on my lap.


The Russell 2000 had an even worse (that is, better) day. My index puts on the $RUT did great.


The S&P is approaching the re-entry point on that channel is busted above a number of weeks ago.


I've stopped buying puts on AutoZone - there's only so much punishment I enjoy - but this stock is really looking toppy.


Ol' beanie has mentioned BIDU so much I might as well put up a chart. My hat is off to any chart that can do this on a day like today.


I added to my Capital One Financial (COF) position.


The DIA puts aren't as clean a deal as the IWM or RUT puts, but they're OK - - decent volume and a 10 cent not-too-terrible bid/ask spread. I did a day trade on these today with good results.


Goldman Sachs (GS) continues to be a put position I believe in.....although the big plunge never seems to happen to AJC's employer.


I've mentioned McKesson (MCK) many times because of its Fibonacci fans. Add to this now an imminent head and shoulders breakdown.


Someone mentioned SHLD in the comments section today.......thanks very much! I've mentioned Sears over and over. It's been inching down. Only today did it really take it in the groin.


VMC is kind of an interesting pattern, inasmuch as it seems to be breaking below a pretty wide consolidation rectangle.


I heard this tune today, and it reminded me of the markets.......to everything there is a season. Bears: I swear it's not too late.

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.

Kick the Clay that Holds the Teeth In

As a true sign of the times, here's an article about a 16 year old girl that is confident her business will make her a billionaire not just in her lifetime, but by the time she's 25. OK, sister, good luck with that.

I've mentioned the correlation between the NZD/USD and U.S. stocks, and I've got a feeling some are skeptical. Here's a graph of these two apparently unrelated financial instruments. You can see the correlation yourself. In fact, it gave a pretty good heads-up about the 2/27 plunge two weeks in advance.


Regular readers of this blog know that the head and shoulders is a favorite bearish pattern of mine. The way it is supposed to work is well illustrated by MRVL, shown below. The difference between the neckline and the top of the head was about $10, which traditionally is the target price for the fall. MRVL nailed its target to the penny.


My hope is that my AMR short - which has been doing great, thanks for asking - will follow suit as well. There's quite a way to go before the target is reached.


I don't have a position in Capital One Financial (COF) anymore, but I've got to say, this is one monstrously large looking topping pattern.


Merrill Lynch (MER), on which I own puts, seems to be turning the corner. RSI and the slow stochastic are in a downturn, and the retracement seems to have played itself out.


Much can said of US Steel (X) as well.


I think today might be the last "the Dow has to go up because it just keeps going up" day for a bit. My sense is that we'll see a lower Dow on Monday. See you then.

Finally!

At long last, the Dow did not go up today. A one-day respite, at least, from the torture!

A lot of people are responding to the poll I posted earlier today. For those that haven't responded yet, please do so.......

Should this blog allow anonymous posters or require registration?


What's the one thing you'd like to see that would improve this blog?


What kind of trader are you?


Thank you. I've been watching the results accumulate today, and it's very informative.

All eyes have been on Asia, particularly since the 2/27 blowout. People are wondering when the mania is going to end. God only knows, and He ain't telling. Here's a graph of Malaysia. I mean, these aren't magical fairylands, people. Have you been to Malaysia? I have. I think it's a hole, myself. But then again, I'm an Ugly American.


Even though we haven't crossed the fabled 13,000 mark on the Dow, the press is already impatiently looking for the next big milestone. ''We could be looking at 14,000 by the end of the year,'' said Robert Froehlich, chief investment strategist for DWS Scudder. Yeah, fine. Whatever.

Anyway, the S&P had a touch of weakness today, but notice how it stayed perfectly above its former resistance level. In other words, now that line represents support.



The Morgan Stanley Tech Index looks like it could fall badly, but unfortunately, the spread between the bid/ask on these options is wider than Rosie O'Donnell's underwear. (I wonder to myself just how long people will pause before clicking that link.)


A couple of cautionary tales for you. First - - - American Airlines (AMR) appears to be a lovely head and shoulders pattern.


But look at Continental Airlines (CAL), which I was mentioning as a short for the same reason a few weeks ago. It pushed above its neckline twice. And then - finally - started to fall. All I can say is that, because of this, AMR doesn't' excite me as much as it might, and this serves as a reminder of the importance of stops.


Another cautionary tale. The stock ONT looks like a honey of a buy. I've mentioned this before. Great volume. Great price action. All the right moves.


Let's look back a few years, though. A similar situation with the same stock. Let's presume you jumped in and bought a bunch of this.


What happened next? The technical term is that the stock farted around for years to come. In fact, the aforementioned farting was down at a substantially lower price. So although the burst above the saucer was great for those who got in early (and got out), it wasn't so hot for the buy-and-holders. And that's not because the market was bad in general. On the contrary, the market was very strong.


Capital One (COF), which I mentioned as a short countless times earlier this year, continues to fall.


Lehman Brothers (LEH) has a fascinating interaction with those Fibonacci fans. Investment banks have had huge runs up (yes, yes, I got blown out of GS) but this is worth watching.


As for Southern Copper (PCU), I think one glance at this channel would suggest that, no matter what your viewpoint on the stock, we're certainly at the northern end of this channel.


Check out Potash Corp (POT). That's quite a shooting star, yes? A short on this with a stop price just above the high today may pay off nicely.


Finally, Schnitzer (SCHN) continues to act bullishly. I'm including its former breakout from years ago to indicate what a handsome move this stock has made in the past from a similar breakout.


I'll post the results of the poll tomorrow and indicate what, if any, changes I'll be making to this blog based on your input. Thank you!

Topless

What more can I say? The market is on turbocharged boosters right now. Bad news doesn't stop it. And Lord knows that good news isn't going to stop it. Crossing the fabled 13,000 mark next week seems to be virtually a foregone conclusion.

Looking at the SPY (S&P 500 ETF) below, you can see the entire bear market of 2000-2002 has been rendered moot, and we are way up to lifetime highs. And this is nothing compared to the likes of the MDY.


I think I've personally had just about enough of the "top calling" business. As you may have noticed, I'm just taking it one day at a time. Let me illustrate how hazardous top calling can be.

Take a look at the graph below. Let's put ourselves in a bearish mindset and, observing the rapid, relentless explosion higher of equity prices, assume that the tide is going to turn. Or at least things are going to rest for a while.


Look what happened next. It slowed down, but it didn't stop going up. Buying kept feeding on itself.


Now the market accelerates yet again. The bears have been wiped out. All the bulls are zillionaires. And bets start taking place as to when the NASDAQ when overtake the Dow in terms of point value (Remember that?) So the bears completely throw in the towel.


After a few months of a soft market, the bulls could just as easily look at the graph below and figure that the market's done taking a breather, and it's time to push higher again. It's very easy to imagine the sentiment. After all, it looks like the "shake out" is through, observing this graph.


And we all know what happened next. And I've marked each of these points on the chart below. The bears were dead wrong all the way up. And the bulls were dead wrong on the way down. And yet we can see (if you try to be objective) why the bulls or bears were completely rational in their conjecture at the time of these graphs.


So is it hopeless? After the past two months, I'm starting to think so. It's very demoralizing to be analytical, rational, and careful, and yet be so wrong. And it doesn't exactly help that my free contribution of thoughts yields mud-slinging yuk yuks from the bulls who frequent this board.

One item that actually turned out as predicted was Capital One (COF). In spite of today's massive market rise, it was quite weak.


A few stocks had great earnings, opened way higher, and yet sported a pretty large bearish engulfing pattern. McDonald's (MCD) is - excuse the pun - a whopper.


I'm glad this week is over. All this bullishness is stomach-churning. Maybe we're just at point "A" of the graph shown at the top of this post. But so many stocks have gone stratospheric, it continues to be hard to believe.