Eight is Enough

Well, the octet of upswings in the market met a welcome halt today. Between the real estate market going down the toilet and the Fed gritting their teeth and confessing that the economy is starting to weaken, the market got the kind of one-two punch in the face it needed.

One catalyst for the drop in late February was the carry-forward trade. The NZD/USD nicely captured this (shown in green). As you can see, this FX has been pushing higher and higher (in spite of staying obediently below the broken trendline). A weakening here would portend good fortune.


Much of the indices resemble the NASDAQ 100 ($NDX), shown below - - basically, a slip from the huge upswing we've seen over the past six weeks (which I consider a retracement that will precede a much bigger drop).


My favorite index puts - the Russell 2000 - had a pretty good day. I've adjusted the stop to 816.13 on these.


And here's the S&P 500 ($SPX). Check out the RSI and Slow Stochastic indicators.


Gold & Silver ($XAU) seems to have reached the top of its descending channel. I've got a big block of puts on this index now too.


One of the most resilient indexes, the American Stock Exchange Major Market Index ($XMI), may have double-topped. I hope so, at least. God can't hate me that much.


A high-risk bullish play might be found with - believe it or not - some of the battered sub-prime lenders. Check out Fremont (FMT). The monster volume and triple bottom might mean a nice bounce higher. Of course, you could also wake up one morning and find one of these companies has declared bankruptcy, a la NEW. That's why I'm not going to touch it myself.


General Growth Properties (GGP) finally took a tumble on some very sizable volume. Lots of room left before it hits that trendline.


Tired old has-been Microsoft (MSFT) seems to have a nice H&S pattern.


NutriSystem (NTRI), favorite stock of departed commenter hurricane5, is again in my portfolio. No surprise here, folks - I've got puts on it. Another nice H&S pattern, in my opinion.


PSB continues to shape up nicely. I'm jumping the gun a bit on the pattern, but as long as it's shaping up as roughly drawn here, I'm a happy fella.


Reynolds (RAI) is finally started to sink. It's about flippin' time.


Someone commented that getting a long series of modestly down days would be better than one whammo day like we had on February 27th. I'm inclined to agree. But cruel fortune doesn't care. We simply have to take it a day at a time.

The Stalemate Continues.........

Twelve stinking points. That's all that got lopped off the Dow after the Fed announced no change in rates (as everyone expected) and that inflation was indeed still a concern.

The intraday chart below shows what happened. After a nice pre-announcement drop, people sort of clung to their chests until the announcement, at which time the market did its usually insane up-and-down which-way-is-up madness. Most of the day's earliest losses were wiped clean.


I took a snapshot of $MSH earlier in the day since I thought it was worth considering as a short. Keep it on your radar screen.


The $OEX is sporting a big ol' hanging man for today. These don't happen that often. Just try to find another one that's even close on this chart. These usually suggest tops. Of course, we're in a market where bad news is good news and good news is great news, right? So - - the hanging man will probably muscle the noose off his neck, jump to the gallows, and start twirling around with an exciting Up With People dance.


As I've mentioned, the Transports are the only really bearish index with us, and it continues to behave nicely. Thank you, Mr. Rail.


Just to get an idea of the quagmire the market is in, look at the American Stock Exchange Major Market Index. Four days in a row of virtual carbon copies. Booooooooring!


I haven't shown my positions in a while. I've trimmed this a lot from the days of holding eighty positions! I'm much more into cash now, as this market continues to idiotically lurch higher.


Now - some individual stocks. Conoco (COP) seems to be a safe bet, as it is at the top of a well defined trading range. As always, though, upside breakouts can and do happen! So be careful.


This one isn't a short or a long - just kind of a puzzler. One of the strongest stocks lately has been Campbells. That's right - soup. Consumer Defensive plays are all the rage, I guess. I guess I've been in the Silicon Valley too long. I find it curious how people can get all excited about someone who puts alphabet soup into a can and sells it for 79 cents.


Google (GOOG), one of my more speculative put positions, is weakening a touch. Using my employer's "three arrows" method, we can see here that we've got a triumvirate of down arrows.


Goldman Sachs is my favorite investment bank short right now.


Heinz is another one of those "huh?" stocks, like Campbells. Ketchup. I guess it's all the rage.


MDC has retraced to its neckline nicely. I don't love this enough to make a position out of it, but it's well worth considering.


Merrill Lynch is a sky-high pattern which I've also secured as a short position.


Meritage (MTH), mentioned here many times in the history of this blog, has also retraced to its neckline.


I have not touched OIH for a while. I had a great time with it during the summer. It seems to be at a real stalemate right now. We're all just watching it for a breakout in either direction. I am guessing down. Surprised?


Fred Hickey is one of the few gurus I really enjoy reading. He had a really interesting mention in this week's Barron's where he was slamming tech stocks. One of his short recommendations is one on which I own puts, Research in Motion (RIMM). The article says, in part:

"In an echo of the 2000 tech mania, the analysts covering Research in Motion don't seem to be fazed by the fact that its market cap is now up to $26 billion, or 11 times sales." He notes, in contrast, Motorola (MOT), the cellphone giant and a key competitor, with sales of $42 billion, versus $2.4 billion for Research in Motion, yet its market valuation is only two times larger and 1.3 times sales. Palm (PALM), another competitor, sells at less than one times sales. Fred's calm assessment: Research in Motion's "valuation is certifiably insane!"

Lastly, Tesaro (TSO).


On what can we pin our dreams next? Crappy retail sales? That's tomorrow morning. Hope springs eternal in the bearish breast!

Slippery Oil

For a Fed day, it was relatively peaceful. The bulls got virtually all their gains within the first half hour of trading today. Sigh. Oil saved my bacon again, though. It would have been a rotten day otherwise.

The highlighted area indicates the Fed zaniness. Usually the market goes stark raving mad after an announcement. This swing was actually really modest. I guess the lack of volatility has extended even to the most extreme of events. It was a snoozer, pretty much.


As I mentioned, oil (OIH in particular) continues to go great. We've got an honest to goodness breakdown, with a beautiful head and shoulders pattern, post-retracement, at this point. This is textbook perfect.


The gold and silver index, $XAU, seems a bit stuck at its retracement level. It is even more of a huge head and shoulders pattern than OIH, but it hasn't broken down yet.


The S&P had another strong day. Indeed, it's been disgustingly strong since mid-July. We haven't seen this much consistent strength since last autumn. We're either at a double top or - - with our luck lately - - we've got plenty of room left (green shaded area) on the upside. Oh, I'll mention this a hundredth time for those who missed it - - click on any image to see a bigger image.


The Russell 2000, on a long-term basis, is obviously far, far above its "Internet bubble" highs. It broke those long ago.


At this point, if it breaks through the horizontal line shown at 742.26, we're in even bigger trouble than we are already. That would be extremely bullish.


One stock I happened to come across today is CAL (Continental Airlines). Looks like another nice short/put-buying opportunity with a pretty low-risk stop price.


Things still haven't turned to the bear's favor. Not at all. I'm glad for OIH, at least. That, and a lot of related stocks, have been doing wonderfully poorly (which is good for the bears).