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.

Grace Under Pressure

The market by and large meandered today, moving slightly higher after yesterday's big push upward. The Russell 2000, on which I own the most puts, actually inched down in spite of the other major indexes pushing a bit higher.

The Major Market Index ($XMI) does a pretty good job representing where I think the market is it, which is at the upper reaches of a retracement. For it to move beyond its February highs would require surprising strength. It could happen, and if it does, it's time to return to the bear cave, perhaps for a long while.


The Diamonds (DIA) also do a pretty fair job - this time with some trendlines I've drawn - illustrating the retracement.


Capital One Financial (COF), which I've been mentioning forever, is finally starting to move meaningfully lower. It's about time.


Markwest Hydrocarbon (MWP) has had a huge run up the past few months. But look how the volume has softened up. It has been consolidating for a few weeks. This could mean a breakout, of course. This would be a more interesting short to me if the volume weren't so thin.


Pico Holdings (PICO) is something I mentioned as a long a while back. It seems to have run out of gas. I'd actually look to this as a short (with a tight stop) at this point.


Lastly, Ryan Air (RYAAY) is behaving in accordance with its broken trendline - - that is, moving away and down from it. This stock had been hyperbolic until that trendline was snapped.


Tomorrow will end this shortened trading week. Someone in the comments section has observed that most recent shortened weeks have been strongly bullish. We'll see if that's true or if people get jumpy enough about three days of a closed market to sell instead.

Stalemate

In yesterday's post, I laid out bullish and bearish arguments for the market, since we seem to be in one of those awful stand-offs between the bulls and bears. Today played out in precisely that manner.

The widely-anticipated jobs report came out. The results were interpreted as bullish. The markets zoomed higher at the opening bell. Fibonacci retracements were touched all over the place, and then the market started to soften fast. It went negative. Then positive. Then negative. Then positive. And finally ended with about 1/4th of the gain it had at its high point. Just ridiculous.

I'm 100% in puts and shorts right now. Below are my positions. Boldfaced items are puts.


Here's the Dow 30. You can see it bounces off that Fib beautifully.


And here's the Russell. For the second day in a row, it bounced off the fib. It actually managed to sneak across the line a little, but not for long.


The $SPX is pretty similar to the $INDU.


I've got a couple of long suggestions. Here's Bowater (BOW):


And, and even better one, Pico Holdings (PICO), which has the advantage of a big volume surge recently.


A few short ideas. BBD seems to have retraced within the Fib retracement nicely.


MS, like a lot of other investment banks, has likely retraced to an area where I think it doesn't have the strength to climb any higher.


Microstrategy (MSTR) blew me out a couple of weeks ago, but it was a one-day fake out. This one looks weak.


Options on the QQQQs have the advantage of being penny-priced, which is much more fair to traders.


Reynolds (RAI) is retracing back to its broken dome pattern. I also have puts on another aluminum stock, symbol AL, but the chart isn't as pretty.


Lastly, symbol RYAAY looks like a low risk/high reward short candidate.


My kids have given me some kind of bug, so I'm typing this with the chills. Even though it is 70 degrees outside, I'm going to go sit in front of the fire! Have a good weekend!