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........

'Til Tuesday

It's really simple.

Tomorrow morning, the CPI will be released. The market will react. If it reacts poorly (which means down, which is a good thing), it's party time. If it finds the report vigorous and exciting for some reason, that's a bad thing for us. Because, simply stated, today made a lot of sense to me, virtually all my positions went up, and all my charts are positioned for juicy profits tomorrow. But a perverse reaction to the CPI could muck that all up in no time.

I said last week that Massey Energy (MEE) was looking like a good short, given its head and shoulders pattern. One person wrote in that evening's comments section.....

I'd stay away from shorting MEE... One of these Merger Monday's it's name is going to be on the "acquired list" and that's going to suck for anyone short it. Crappy management, but great reserves, and the coal bidness ain't going anywhere soon....

Well, the stock took a big fall today, and based on this pattern, there could be plenty more room to fall.


Indeed, some of the put options on this went up literally thousands of percent. Not bad!


On a more bullish note, another stock I've been mentioning as a beautiful buy is ONT, and it continues to do terrific. Check out the strength of that volume!



Because the market is so complacent right now, many puts are being sold on the cheap. Check out this chain from earlier today for MMM. Just look at the October put. For 63 cents (if you strip out the intrinsic value)......63 cents per share!......you get the right to sell the stock at a fixed price of $95 any time between now and October. Even more interesting is the fact that time premium is just about zilch.....July is the same as June....is the same as October! Incredible.



The Major Market Index ($XMI) does a nice job of showing where this market stands. If - - and I say if - - the market even freaks out a little at the morning's CPI, tomorrow is going to be a fantastic today. Today was really good, only because I was running around buying puts when the Dow was up 50 and everything else was basically stalled. I knew it wouldn't last.


I've got to blast off to a meeting, so I'm just going to throw you raw symbols now, all of which I have either puts on or I am already short. Here we go.....AKAM:


BEN:


CROX (can you say fad?!!?!):


CRR:


DE:


EWM:


INFY:


MMM:


RIMM:


WHR:

The Pain Grows Stronger/Watch It Grin

Years ago I remember seeing a Dilbert cartoon where Dogbert had yet another get-rich-quick scheme. This one was a generic newspaper which featured headlines about "Unrest in Middle East" and "Government Proposes More Taxes". It was basically a newspaper you could read any day for the rest of your life, and it would always be true.

Much the same can be said of the market - at least in terms of the Dow 30. I'm starting to lose track. What would today make it......the last 27 out of 30 sessions up? Something like that. It's starting not to matter. As you can see from the graph below, it essentially never goes down.


I am staying far away from SPX puts (or DIA puts, for that matter). The only index put I've been accumulating is on the Russell 2000. Earlier in this cycle, the Russell was strong than the Dow, but recently, it's been falling behind. It also has the added advantage of falling faster on the rare occasions when the market is weak (notice the recent dip, shown in blue).


A closer look at recent activity illustrates the relative weakness better. Today the Dow was up yet another 50, whereas the Russell - a broader index - actually fell.


The NASDAQ Composite is also relatively low on steam compared with the mega-caps.


And the $XMI is continuing the exhibit the rather fascinating "hug just beneath the broken trendline" phenomenon.


I have no position in the CME, but it's interesting how this is shaping up recently. It's not really a head and shoulders pattern, but it definitely looks toppy.


My puts on INFY did pretty well today. Infosys (INFY) fell on a good pick-up in volume.


Symbol MEE is a pretty massive head and shoulders pattern, although frankly patterns this big don't have as much weight with me, since it has already kind of done the retracement-and-fall-again dance. But your eyes have every right to make an independent judgment.


Symbol MS is doing the same shtick as $XMI.


Airline RYAAY finally took a tumble, losing about 20% of its value in the past week or so. It was really overheated earlier, and I don't see any clear pattern at this point.


Long suggestion SCHN continues to do well, although I'm sure the massive buyout news regarding AL/AA had everything to do with today's rise.

Bears and Atheism

I think my bear avatar is so cute, I just have to show it again. Particularly since we had some red today.


Before I start with the charts, I'm going to be an idiot and actually mention religion in this blog. Now, let me be clear from the outset - - this isn't about religion per se. It's about a parallel I've noticed. People seem to confuse metaphors with analogies quite a bit. I don't - - and the analogy is this: atheism is to Christianity as bearishness is to bullishness.

Why, Tim, what do you mean? I will try to explain without ticking off too many people.

Christianity in the United States is mainstream. Most people in the country identify with it. It has been the backbone of this country since its founding, and although certainly attendance at Sunday service has been declining for years, by and large it's a stable, popular base.

So is bullishness. By and large, people in America are bulls. They believe in the future. They believe in optimism. The growth of America over the past three centuries in testament to that. Bullishness works. Bullishness makes people rich. Bullishness is the American way.

And here we come to where the weirdos are. Where the freaks live. The atheists. And the bears.

Both atheists and bears are outside the norm. They are, generally speaking, frowned upon. They are not the mainstream, and deep inside the hearts of those who are in the norm is a secret wish that the doubters will be proved Supremely Wrong at some point. In the case of bears, that would mean that It Really Is Different This Time, and markets will go straight up for many years. For atheists, it would mean that Jesus himself shows up on the Today Show to announce his second arrival.

And this is the troubling part for me. See, I'm a good suburban protestant. I know what it feels like to be in the mainstream. Methodists and Presbyterians do OK in the suburban jungle in which I've grown up and thrived.

But recently the atheists have been getting a lot of press. I'm surprised Richard Dawkins didn't make Time's Man of the Year for 2006. Bestselling books such as The God Delusion are selling like mad.

And here's where the parallels click..........Richard Dawkins is smart. Really smart. And it's got to be just a little bit troubling for those who give it a few moments of thought that really brainy, thoughtful, deep-thinking people are atheists. Because it makes you wonder what "side" you really want to be on.

And so it is with the bears. I'll be blunt - - I think bears are a lot smarter than bulls. Bears tend to be the more thoughtful, cerebral sort. Given the ways of the world, it also means that bears tend to be Flat Broke. Just as atheists can rest assured that they will not elect anyone to the White House in the next hundred years at least.

It's frustrating to be a bear, just as I'm sure it must be frustrating being an atheist. Because you watch the mainstream prosper and thrive. And you believe in your heart that they are just dead wrong. And you're the outsider. You're the freak. But it's very tough to convince the crowd when you are so clearly outside of it.

Do I have a conclusion from this? Not really. I simply think it's an interesting parallel. I'm not tempted to jump over to the atheist side any more than I'm tempted to jump to the bullish side. So I live with being a stupid sheep and a brainy bear at the same time. The duality of man!

Are you still reading? Are you still there? Good. Then we'll look at a few charts. Honest to God.......

The market did what I wanted it to do today (for a change), which is push higher, get the bulls excited, and then dash their hopes. Nothing makes my day more than a disappointed bull. The markets were down across the board, particularly in the world of gold and oil. The MidCap 400 did not break above the horizontal line shown here, indicating a possible failed pattern.


The NASDAQ was especially weak today. Here we see the $NDX slipped away from its formerly ascending channel. Ta ta, naz.


The Russell 2000 is also failing its bullish ways. The relative strength continues to weaken and is heading below the 50 mark. I really like the way things are turning around.


And here is the S&P 500, the only stock index on which I own puts right now (and a disturbingly large amount). We see how the RSI pulls farther away from the failed trendline.


The last index is the $XAU, the Gold and Silver index. We have been watching this a while, and this is a closer view than the one I normally provide. There still is no cut-and-dried pattern here, but it is clearly weakening, and I would look for it to fall all the way back to its neckline, at least.


Although oil has already started getting weaker, it might not be took late to get on board FTO, assuming the emerging head and shoulder completes.


Google (GOOG) fell nearly twenty points today. There is absolutely no doubt at all from this chart that the former "$500 now! $600 tomorrow! Go, go, go!" enthusiasm is shot. Google is priced for perfection. This company is far too arrogant to just keep sailing.


HWAY looks like a promising short pattern.


And MEE, mentioned here many times in the past, is behaving as it should.


I've also mentioned TSO, which had a solid down day. Oil's weakness is benefiting many of the items we are watching.


I'll brace myself for the comments section, since I've strayed away from charts. But keep in mind I'm not advocating a religious position here at all. Although I admit to proselytizing the Church of the Bear without shame.