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.

Oh, Baby...........

I'm feeling a terrific sense of control over this market (at last). Recently, I've been doing extremely well. Even with intraday trading, I'll buy calls at just about the bottom, sell them at just about the top, then buy puts, and then ride those all the way down. I'm rarely this "in synch" with the market, but it's been a good feeling.


I noticed that Barron's this week features Blackstone's CEO on the cover, pointing out that a massive public offering of the largest private equity partnership clearly signals the peak of these beasts. I couldn't agree more. Oh, let's check in to see how the public's investment in the two-day old Blackstone has been faring.......


Of course, the big news today is that today's bounce from last week's downside action completely evaporated. The Dow surged 120 points higher (and I profitably closed out some calls I bought earlier in the day, then gobbled up a huge number of puts), then the entire gain by blown to smithereens. As you can see from the Russell, the medium-term trendline is now broken.


About half an hour before the close, I sold all my puts (DIA and $RUT), since I felt the selling was - - at least very short term - - overdone. Here's the S&P 500.....


In a broad sense, I think things have changed. It's been horrible awaiting the change, but I think it is finally here. In the broadest view, I think we have witnessed the passing of the Mother of All Double Tops.


This is not to say I'm speculating on outright collapse from here. On the contrary, I think we're probably due for another bounce up. But - as with today's - I may well decide that the bounce has exhausted itself just a couple of hours into a single trading day. My portfolios are devoid of any index positions right now, and consist of carefully-selected equity shorts, equity puts, and a couple of longs (DXD and BBI).

If you're just dying for a bullish stock, AutoDesk (ADSK) looks interesting:


Real estate has been in a freefall for months. I was thinking it would stabilize. But we might be in for some more downside action. Apartment Investments (AIV) has an impressive head and shoulders pattern.


My short in BEAS had a good day. I've put the clearly defined support and resistance horizontal lines here.


Bear Stearns was the "culprit" behind today's fall. I've been mentioning this as a short (or put purchase) for a long time. You can plainly see how, after its fall from its ultimate high, it tried to retrace........but the jig is up, and it's been falling ever since.


Looking at a broader chart, you can see a major, major supporting trendline has been shattered.


Goldman Sachs - employer of the hottie pictured at the top of today's entry - is suffering as well, although not to the same degree. My puts in this are up, and there's plenty of downside left on the stock, tinted here.


Another set of puts that's doing great is JC Penney (JCP). I've illustrated a potential target. Thank you, polyester! Thank you, leisure suits! Thank you, lawnmower care supplies!


Massey (MEE) is sporting a monstrous, gorgeous head and shoulders, and I think the retracement is complete now.


A bunch of people have written me asking to explain some options trading basics. I'll do it on a quieter day when the market is up half a point or something. I've had enough. I'm going for a swim........

Poetry in Motion

I've got a riddle for you.

What well-known Jewish personality made a bundle of money on Wall Street today and needs to have their back hair waxed? If your answer is Abby Joseph Cohen, you are technically correct, but the answer I was seeking was Stephen A. Schwarzman of Blackstone.

OK, here's the second part of the riddle (isn't this fun, kids?)

What percentage of public investors have profits on newly-minted Blackstone Group (BX) today, now that the trading day is through? The answer: basically zero. Oh, I'm not talking about the midget founder of the place. He's doing just fine with his billions, thanks for asking.

I'm talking about the poor schlubs who thought they could get inside the club by buying into this stock. Virtually every single share bought is in a losing position. Nice going, folks.


Yesterday, if you'll recall, I wrote:

But tomorrow is - at last - the big day. That's right - it's Blackstone day. Apparently the demand for shares in BX is about seven-fold oversubscribed. Nothing would be more poetic than the market taking a fall tomorrow.

Well. Down 189 more points. Nice.

I actually had a great day, making money both on the short side and - for the brief bounce of the day - on the long as well. I remain cautious and humble in the face of a massively moronic and gullible public that could be coaxed into buying again. Thus I tighten my stops every day.


The Russell has been stronger (relatively) than I'd like to see. But it remains attractive to me largely due to its reasonable bid/ask spread on the options. I remain dumbfounded at the complete rip-off represented by the S&P 500 options market. It's just criminal.


Oh, speaking of the S&P - - - in spite of the recent fall in equities, we remain absolutely sky-high. Dare I even say grotesquely overvalued. Oh, well. It'll take years to sort out. Long story short, don't be fooled with the tiny inching down we've been doing. It's nothing compared to the radical overvaluation still present. Trillions of dollars of equity need to be destroyed before we are at interesting values again. Whether the top has passed it totally unknown. And it doesn't matter to me, as long as I manage and maintain these stops responsibly.


Symbol ALB bounced up to a perfect retracement, thus permitting me to re-enter the position which I closed profitably just a couple of days ago.


Symbol CAH isn't doing badly for me either. I own puts on this.


Although Cigna (CI) is too big to simply collapse, it's got a cute little H and S pattern whose neckline was broken today.


A new short I think I'll enter next week is - again - Malaysia (EWM).


I've got to hand it to Google (on which I have not had a position in a while) - - they seem to be doing everything right. This is a gorgeous bullish pattern - just beautiful - particularly in light of today's market action. Poor old Yahoo is just a mess. Why anyone ever used Yahoo in the first place - - I thought they sucked in 1996 when I first tried them - - is beyond me.


Goldman Sachs (GS) suffered some today, so my puts prospered. This isn't a big fall by any stretch. I guess maybe the lame-o BX reaction hurt them? I don't know.


I continue to hold my JC Penney (JCP) puts, which push a little higher into the green each day. This is a dynamite pattern. Never has polyester clothing been so good to me!


I haven't shown Meritage (MTH) in a long time, but I just want to use this to illustrate the kind of slow grinding death equities can go through. I think this is a good proxy for just about the entire stock market, although housing got a head start on the rest of us.


It's been a good week. Particularly since the detractors are too sheepish to show their faces around here during down days. So let's celebrate:

Son of a (Triple) Witch......

Well, what a difference three days makes.

As of Tuesday's close, things looked just hunky-dory for the bears. Although such a rapid, 400+ point drop from the Dow certainly suggested it was time for a bounce up. But the very unresolved question is whether the bounce was the contratrend in the scope of a real downtrend, or whether the 400+ drop was no more important than the one from late February.

One trend is clear - - comments are up. Even with anonymous posters shut out of the comments section, activity has been ramping up in line with the market's volatility. Big down days bring out the snarling bears, and big up days bring out the told-ya-so bulls. Of course, beanie11111 alone was responsible for 15 of the prior post's comments, so a few people are largely responsible for the activity. (And Beanie - we get it - solar, solar, solar - enough!)


Looking at the $INDU, the best the bears can hope for at this point is a double top. A neat cascade of lower lows and lower highs simply didn't happen.......today's push higher broke that theory to pieces.


If the market does continue its descent next week, the Russell 2000 is, in my opinion, the best place to play it. Not only because of the relatively decent bid/ask spread, but also because it is relatively weak in its performance.


I don't think I've ever mentioned ACL before, but this looks like one which has turned the corner from uptrend to downtrend.


I got into a short position with BEAS today, and it's a bit in the green already, in spite of the market's strength. The right shoulder of this pattern is half completed.


I shorted BTJ successfully a couple of weeks ago. It has bounced high enough for me to be comfortable re-entering this short.


Cardinal Health (CAH), a short I got into a couple of days back, is doing pretty well. It is encouraging to see stocks act weak when the market as a whole is very strong.


Constellation (CEG) has a medium term downtrend that is intact so far.


One highly liquid, low-risk short (or put purchase) are the Diamonds (DIA). A clean stop here would be 136.84


Now that Goldman's earnings are out, I think the risk is much lower to short this stock. The blow-out earnings yesterday actually caused the stock to declined, and it seems toppy enough to me - and far enough away from the trendline - to warrant another attempt.


I first mentioned CRDN as a long back on May 3rd. Since that time, it has push much higher on very strong volume. I guess the war in Iraq is actually good for this firm.


McGraw-Hill (MHP) is a new short for me, entered yesterday.


I added to my MMM puts today, based on the big rebound in the Dow. It closed the day with a nice shooting star pattern and without penetrating its prior high.


I also bought puts on another megacap stock, AT&T (T).


The rails were very strong a couple of months back due to Warren Buffett's investments there. I think it's time to sell into this strength. I sold short a block of Union Pacific (UNP) today.