Yeah, We Do.........

I've been mixed up with computers a long time - - since 1979, actually. And I've been involved in electronic communities since 1981. Yes, you read right. I've been doing this a while. And I've learned a few things along the way.

One thing I've learned is that there tends to be an inverse correlation between how a person presents themselves (when they can hide behind a facade) and how they really are. This applies particularly to personal appearance. A shining example of this appeared in last Sunday's New York Times, which profiled a number of serious electronic gamers with their avatars. Here's a particularly painful, poignant example:


So the enormous mass of protoplasm on the left is the human. And the svelte, strong, serious warrior on the right is his representation of himself in the virtual world of Everquest.

Now, if you read this blog at all regularly, you really have no reason not to do the free sign-up for BlogLog, since it's a kick to see who your fellow readers are (savvy, witty folks, by and large; with at least enough good sense to swing by here once a day). But I am highly confident that no one reading my blog looks like this.


My caution yesterday was very well founded. In fact, it was spot-on. The market opened. It farted around a bit, then it fell hard. And I closed out my DIA and RUT puts at huge profits.

Then I bought calls. But........because I'm an idiot......I sold them shortly thereafter for breakeven. Then they spent the day going up 20%, so that was about $8,000 down the toilet. Like I said: an idiot.


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. As for BX, I guess it's almost certainly going to close well above its offering price. I guess. But there's something about this offering that I think is rather pivotal in the world of investor psychology.

Anyhoo, my intuition is that tomorrow is that we're going to resume the fall. Perhaps even taking out Wednesday's lows.


One of my favorite real estate shorts now is Kilroy (KRC). If this stock can break its neckline, this is a honey of a pattern. Quite large.


If the market is on the weak side after the opening bell tomorrow, I think some 3M (MMM) puts are probably one of the best places to take advantage of any downside action.


I've mentioned Micron (MU) as a long a number of times. This is a great little pattern, with a volume swell to boot.


It's been quite a week. Let's see how Blackstone day treats us. See you after the close. Oh, and this is me. For real.

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.

My Nude Pictures of Ernest Borgnine

Finally, a skosh of relief for the bears today (only those truly secure dare offer the word skosh in their blog). The market was down over 100 points several times today (but just a skosh) and wound up down 80. Freakishly, the QQQQ left the day unchanged.

In any case, I made some nice green on some intraday Russell 2000 option trades. I'm too war-weary from the past year to hold these suckers overnight, but I can at least say I like the current $INDU chart more than I did 24 hours ago:


The Russell 2000 (side question: has anyone found ANY other index with a reasonable bid/ask spread on the options?!) has been rather strong lately but edged down about half a percent today. No sea change by any means, but we take what we can get.


And, for good measure, here's the S&P 500:


I haven't put a chart up of the $UTIL for a while, but whether you've noticed or not, interest rates have been really pushing higher lately. (Remember those? Low interest rates? The reason the market's been so bullish.........remember?)Worldwide interest rates have been surging, relatively speaking. Gentle Ben's remarks today pushed them higher still.


My suggestion of Coach (COH) as a short is decent thus far.


I am short a lot of housing stocks. Today was a good day for those positions due to the interest rate movement. Essex (ESS) is particularly attractive.


Just yesterday I said Google was a nice looking long position. Today (of all days, considering the market's weakness) it made a nice lifetime high. So - clink! - here's to another zillion dollars for all the adolescent Google zillionaires out there. I'm talking about their employees. Not you.


KRC is another sharp-looking housing short.


I've been charting the thirty components of the Dow Industrials recently, and 3M Corporation (MMM) is a favorite of mine. I've got some puts on this. Continued Dow weakness would be very kind to those.


Oh, and one last thing. JakeGint's pondering as to what "we" saw in George Carlin left me shocked. So here's another clip.

Sheer Energy

Another record. This is getting really monotonous.

One index that hasn't actually reached a new record, but is within a hair's breadth of it, is the S&P 500. It peaked back in January of 2000, and if Monday is up at all, it will almost certainly reach a new record closing high (and I don't need to tell you the financial media will make a huge stink about it).


The $VIX remains very, very low, indicating widespread complacency. You can see how the VIX deteriorated from 2003 through 2005 and has remained low ever since. There was a time when the normal VIX range was between 20 and 50 or so. These days, it's lucky to even stay in the teens.


Real estate has been getting hit, in spite of the market's overall strength. I've got a number of real estate shorts, one of them being AIV.


Akamai (AKAM), which I am short, went up some today, but I am still comfortable that this pattern is safely beneath its neckline.


One days like this, if you see major stocks with weakness, that's usually a very bearish sign. The CME is a good example.


InfoSys (INFY) is an even better example, since its pattern is more clearcut.


The thirty stocks which comprise the Dow 30 Industrials have obviously been very strong, by and large. MMM is no exception, although it seems awfully lofty right now, and it is sporting an impressive shooting star with today's action.


Energy has been incredibly strong. I've mentioned some oil service stocks here recently as good bullish plays. But even looking at the general OIH stock, which represents an amalgam of oil service securities, you can witness the terrific strength lately.


PSB is an other short of mine that has been enjoying the real estate tumble.


Finally, VNO is another participant in the real estate slump, and it features a really nicely-defined head and shoulders pattern.

'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: