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:

Candlesticks Galore

I think it's time to back off for a while.

This may seem to be a sudden change compared to yesterday's post. But I see a lot of reasons why, in the short term, it might be best to take profits off the table and wait it out a bit. I certainly did that today. I've got a lot back into good ol' cash. Specifically, what concerns me for bears is:

• The relatively high $VIX
  
• The abundance of very clear hammer patterns today
  
• The abundance of 'trendline touches' today (intraday lows touching suppporting lines)
  
• The lack of a new catalyst.......the Yen carry forward helped us a couple of weeks ago, and the sub-prime debacle helped us recently......but we need a new disaster du jour, and a pretty gigantic one that that.

Earlier in the day, when the Dow was down another 150 points (actually piercing below 12,000 for a while), a reader sent me this picture (which I appreciate!):


Strictly speaking, they're bison. But it's a nice thought.

In many instances, the kinds of clobbering I've been expecting have exhausted themselves, at least in some industries. Take housing, for instance. I first mentioned Meritage Homes (symbol MTH) way back on January 23, 2006 when the stock was at $58. It lost nearly half its value since that time, so clearly the head and shoulders pattern behaved as expected. But as you can see in the highlighted area near the bottom, there's a bunch of support here, and I think stocks like this have played themselves out to the downside.


That isn't to say that the drop from 12,700 to 12,000 consitutes the Giant Bear Market I've been talking about. Not at all. I'm just saying that, barring an important new catalyst, I can see the bulls taking the reigns again for a bit.

Take today's $INDU, for instance. Support at 12,000 was pierced, but there's a ton of buying interest at that level, so the bears were pushed away, and we had an intraday move of over 200 points.


The MidCap 400 ($MID) is an even clearer example. Look how perfectly it bounced off that Fib retracement level.


The $NDX also held firm. So the failure of the bears to really maul the market indicates to me that the baton was handed back to the bulls in the middle of the trading day today.


$RUT (the Russell 2000) likewise showed good Fibonacci obedience.


The S&P 500 shows the pickle that the market is in right now. It's just stuck on that major trendline. A state of equilibrium in the market stinks for traders......but we may soon find ourselves in a trading range based on this tug-of-war.


The Transports also supports the short-term strength theory. A perfect bounce off the supporting trendline.


I have no new ideas for you today. Sitting on your cash might be wise. Continental is doing pretty good on the short side; I've highlighted a target.


MER touched its trendline perfectly.


Microsoft - which I don't really trade, but it's important to follow - also touched the trendline......to the penny. Although this trendline was broken, I made an exception since it seems to be important to monitoring the stock.


I also got out of SHLD today, at a profit. Same reason - - trendline bounce.


So Monday's post had me talking about how boring the market was. And Tuesday was fireworks. Now we're back to boring. I really think, unless something totally shocking happens, we'll be marking time as the $VIX winds its way back down to the lower double digits. In the meantime, enjoy Flunky the Clown from the late 80s....

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*.

Seven Nation Army

I'm gonna fight 'em all
A seven nation army couldn't hold me back
They're gonna rip it off
Taking their time right behind my back

Another day, another lifetime high on the Dow. C'est la vie.

I mentioned BHI as a short a few days ago , and it got walloped. Even put options that are several months out doubled in value today. Oil in general (be it OIH or a component) is pretty attractive to my bearish eyes right now.


I'm pretty proud of this graph, so click it to see a big version. It's a minute bar of the NZD/USD forex trade I've been suggesting. The symmetry between the phases I've shown here is really intriguing to me. I've numbered it for clarity. I've been trading it both up and down (long and short) during the most recent cycle. I imagine we're about ready to head back into a long tumble now. This is a really fun currency to trade, in spite of the wide pip spread.


The Russell 2000 remains my favorite index on which to own puts right now. Put values have been getting creamed lately by (a) rapidly rising index values and (b) withering volatility premiums. A one-two punch. Call me crazy, but I am loading up on them at these levels.


Allstate (ALL) has a dainty head and shoulders pattern that I think is worth trading, since it seems to have fully retraced.


BBD has a clean relationship with its Fib retracement.


This is a bigger graph than I normally show - ten years - and it's of Goldman Sachs (GS). I still love this short.


HES is another fresh one I'd suggest you check out.


I've still got my IYR puts. They're under water, but just take a gander and how lofty this sucker is.


My MTH short is still solid. I am once again showing a bigger graph so you can understand how far this thing could fall.


OXY is another oil short worth examination.


PCU isn't as clear-cut, but it's at the top of a channel, and I'm going to nibble some puts on this one tomorrow.

Double Top

In honor of the late Anna Nicole Smith, we will direct our attention to another artificially-inflated bubble without much intellect behind it which no one thinks will die so young: the U.S. stock market.

The $VIX is forming a pretty decent inverted head and shoulders pattern. I've drawn the neckline here. Clearly it would be beneficial for the bears for the $VIX to push its way above this neckline, thus completing the pattern.


The S&P 500 remains beneath its broken trendline. The huge divergence between the price action and the indicator is quite intact, with today finally registering a small downturn in the market after several days of doing basically nothing.


Much the same can be said of the Dow 30.


John Deere (DE) is at the top of a sharping ascending channel.


And Cummins (CMI), mentioned here recently, has put in a possible double top.


I put Boston Properties here (BXP) not to suggest it, but merely to marvel. It's incredible - simply incredible. Much came be same for any of the components of the Real Estate group (wasn't there supposed to be a deflating bubble? Guess that's just residential....)


Bear Stearns (BSC) is finally losing a bit of its steam.


Aetna is obeying its Fibonacci retracement very nicely.


Reynolds Aluminum (RAI), also mentioned here recently, is dipping.


MTW seems to be in a series of lower highs and lower lows - often the makings of a good short position.


MTH looks like it has fully retraced to the neckline of its head and shoulder pattern.


And the same can be said of MDC.


The DJ Real Estate (IYR) equity is breathtakingly high - - which just goes to show stocks sometimes have no trouble defying their resistance lines!