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!

The Wow Starts Now

I read today's trading described as "erratic." That's an understatement. It was a madhouse. For most of the day, it seemed that the market wanted to freak out the final weak hands. But as if that weren't enough, at the final portion of the session, the daily lows were cracked, and the market plunged even further. All of which makes me angrier at myself for the $350,000 in profits I walked away from less than a week ago.



Those of you who took advantage of my New Zealand suggestion (made precisely at the top), send me some flowers or something! I mean, I nailed this thing totally on the head. Little did I know that this currency flux would be driving a worldwide plunge in equity markets.


Part of the freak-out today was from the continuing damage caused by feckless "flipper" real estate twits. Just take a look at sample financing company getting trashed.


My suggestion on BP continues to do well.


And Carnival, purveyor to obese, bored "travelers", continues to fall as well, as I've mentioned it would many times.


Take a look at the Fibs on the Greater China Fund. Looks like we're in for a bounce, doesn't it?


Lehman is just one example of many of stocks that seem to have had the air taken out of them but are reaching support levels. In this instance, based on Fib fans.


Another victim of the housing collapse - MTH. Once again, a short I suggested many, many points ago.


But today was just maddening, as I said. Look at SPY. The horizontal line shows what I thought would be the support level. In the morning, we started bouncing higher (as I imagine we will tomorrow morning). All day the market farted around. And then, as shown by the highlighted area, we got whacked.


One long idea for ya - UNP.


I've got to scoot. My equity puts have been doing fantastic. But I'm a complete moron for selling those index puts. Ugh. What a rotten feeling. I can only hope we get a nice fat bounce so I get a second chance. *Sniff*.

Animal Mother

I am channeling Animal Mother. Bulls, you have a real chance of losing control. Stay sharp!


Some folks (well, one - Health Affairs - only God knows what on earth that name is supposed to mean............) suggested I would falsely claim I called the fall. I didn't call the precise fall (otherwise I'd be on Time magazine), but, come on, I gave some pretty clear warnings.

On Saturday, my entry was appropriately entitled, "I'm Starting to Like This Market". I wrote:

The Russell 2000 has been unkind, but I think we're over the worst of this. Here is a sixty day intraday graph; the head and shoulders target of 30 points to the upside has been plainly reached. Clear as a bell.

On Monday, once again, an appropriate title - "Crossroads" - where I wrote:

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.

Finally, after the fall, on Tuesday Night...

...as for tomorrow - - again, I haven't looked at a single chart yet, but my early guess is a quick drop in the first half hour and then a big rally afterwards. Not hundreds of point, but maybe 100.

And what, dear readers, did the market do today? There was a quick drop in the first half hour. And then it rallied 100 points (well, 137 at its peak, but you get the idea).

Let's turn to the delicious Abby Joseph Cohen and see what she had to bark today......(this is just an image; don't bother clicking on it for the video; you have to go to cnbc.com for that).


In the video interview I watched (on perpetual rah-rah CNBC, which I never, ever watch, except in the rarest of instances), she stated that the market's "valuation, if anything, has gotten a little bit better". Yep, if you liked the Dow at 12,700, you'll love it at 7,000. She goes on to say that she (it is "she", right?) is targeting a 10% increase this year........and that's conservative....."assuming a deceleration in ...profit growth..."

AJC says of the U.S. equity market......"our market is underpriced....[and represents] very good value." Of course it does, you devilish temptress! The interviewer asked her what, if anything, would give her concern about the market. Her multi-million-dollar a year answer? "Events within the economy." Well, my scrumptious little sex kitten, you certainly know how to earn your keep. Rorrrrwwwww........

Let's put our brains back in and get serious. How high will the Dow go up (ahem - "recover" - - from the "correction") before we get a chance to really rake the bulls over again? Cast thy eyes this way:


.....and this.......


........and this.........


The $VIX pulling back to the horizontal line shown would make things more tempting. My God, the bid/ask spread on S&P options today was wider than Al Gore's waistline. (I think the man has decided to consume - live - anyone not living green. Notwithstanding his $30,000/year house bill on electricity and gas).


I'm going to break form and offer a few bullish ideas. Now, don't get me wrong. I don't actually buy any of this crap. I just get sick of being called a permabear. So I grit my teeth and throw some buys out now and then. Here's ABT:


LEH pulled back beautifully to its fib fan:


And SHLD, which I've mentioned repeatedly, remains a handsome graph:


I received many, many emails over the past 24 hours thanking me (some just in general, others with multi-hundred percent gains from my ideas). One kind gent even sent me a video. I share it with you now. Here, my friends, is how the bulls are coping with the market. (Although the bull is disguised as a giraffe here):

I'm Starting to Like This Market

I am starting to like this market more and more. Several reasons:

• People are starting to wake up to what a train wreck the housing market and defaulted mortgages are going to be
  
• We've got a new financial mania on our hands - insanely huge private equity buyouts - that provide a catalyst for financial catastrophe. Remember the failure of the Japanese to buy out UAL back in 1989? That alone caused the mini crash of 1989 - - and that is a puny deal compared to the absurd BSD type deals going on right now.
  
• Upward momentum is rapidly waning
  
• The charts I have been waiting impatiently to start falling are finally doing so - - the investment banks.....the financial service companies......the real estate con artists. They're all starting to crack

The Russell 2000 has been unkind, but I think we're over the worst of this. Here is a sixty day intraday graph; the head and shoulders target of 30 points to the upside has been plainly reached. Clear as a bell.


The S&P 500 is now on the wrong side of the tracks (for the bulls). Look at the broken trendline, and observe how the momentum is leaking out.


Cabot (COG) looks like a good short term bear play.


Lehman (LEH) is representative of the investment banks, finally losing their luster.


I don't have any particular on MWP, but this is a good example of hyperbolic mania.


Recent recommendation NVR had almost 40 points whacked off it yesterday.


Maybe our filthy paws are starting to get a grip on this deluded market. I hope so.

Making It Up to My Readers

Well, I'm going to make up for the lack of a decent post yesterday (although it certainly didn't seem to diminish the activity of the comments section). This is going to be a big 'un.

A couple of weeks ago I mentioned the disparity of wealth distribution in both the U.S. and the world in general. An interesting study came out about this in the past few days which illustrates that the top 1% of wealth holders control 40% of the world's wealth, and the top 2% control 50%. How about the bottom half? They have about 1%. That's right......50% of the world has 1% of the wealth, and 1% of the world has 40% of the wealth. Pretty skewed, eh? Here's the link.

Another interesting item I read in yesterday's New York Times was how bullish newsletter writers have become. The graph in the article shows, on the left side, the U.S. stock markets, and on the right side, the bullishness of the writers. They seem like virtually identical graphs. Make you wonder how much value these guys add. Anyway, again, here's the link.

Today was a nice (although modest) down day. Take a look at the Russell 2000, shown below (and, as always, clickable to be larger), which I've embellished a bit with some studies for those folks finding my graphs too plain. Examine the "waves" of the past, and notice how far the moving averages were at the peaks of those waves. Looking at the most recent data, the averages have never been farther apart.


The same can be said of the S&P 500. Just look how rapidly the index has ascended and how much distance is spread out among the averages. At the same time, look at the continuous softening of the RSI. Quite a divergence, wouldn't you agree?


The $VIX has finally gotten some legs. It seems to be pushing way higher, as the market seems to be not-quite-so-sure about the certainty of indexes rising every day of the year. And this is all in the context of the Dow 30 hitting a lifetime intraday high today!


Now, some specific stocks - most bearish, a few bullish. I've been terribly impressed with Akamai's (AKAM) strength. It seems to be defying any weakness right now. This is one of those stocks which, in 2002, you might have felt was doomed to bankruptcy. But it's been a barnstormer.


I must again offer Capital One Financial (COF) as a short suggestion. My puts on this are doing well, and I just really like the look of this chart.


My small bearish position on GOOG is doing OK as well. I do not normally watch CNBC, but at the airport yesterday I saw they were doing a featured story called something like "Can Anyone Stop Google?" That's my feeling exactly. People seem to think Google is perfect and unstoppable. A good time to fade the market's disposition. Can you imagine the collapse when they make their first earnings stumble? Whether it happens next quarter or in 2025, it will happen. And great will be the fall of it.


Being short investment banks has been tough lately, but maybe we've finally turned the corner. These banks got great news yesterday in the form of a very favorable court ruling, which stated that class action lawsuits against these banks were not permitted. I'm sure the 50 Goldman Sachs personnel getting at least $25 million each for their Christmas bonus (you read that right...) are having the time of their lives. But take a look at the graph below. How's that for a monstrous bearish engulfing pattern?


HYDL looks ripe for a short as well, with a nice, tight stop.


I've had puts on LEH for a few days (someone commented how I got whacked on it; I have no idea what they are talking about; I did not get stopped out). The way it's playing inside these Fib Fans is cool, and it seems to be losing its grip at this level.


Here's a longer view on LEH to bring more clarity to my explanation.


NVR has had a good run-up of late, and a look at the Fibonacci retracement levels gives good reason to short here, with a very tight stop.


I suggested Redback (RBAK) back on October 4 when it was about $14. It pushed to about $17.50 today on strong volume. This stock looks more bullish than ever.


I put puts on RIMM a few days ago for the worst of reasons - "it just seems really high." Luck has smiled on me so far and it seems to be tumbling more than a skosh.


I remain long puts on SHLD.


Apparently all eyes are on tomorrow morning's employment report, released an hour before the opening bell. It's one of those funny ones where if employment is strong, the market supposedly will take that badly, whereas if employment is weak, the market will respond well since rates are more likely to drop. Ya know, folks, interest rates are not the entirety of the economy! Take a look at Japan during most of the 1990's which was completely buried in recession and had negative interest rates. There's only so much good they can do.