Small Caps Catch Up

The market pushed higher today in fits and starts, and in the end, the Dow and S&P 500 closed down a little while the Russell 2000 - home of smaller cap stocks - pushed to a new high.

Even though the market seems unfazed by the weakness in NZD/USD, it is still worth watching. This currency pair has done a decent job indicating recent turning points in the market.


One stock I don't think I've mentioned before is Bunge. This has made a flag pattern recently. You can make of the pattern what you will:


BTJ has been a recent high-flier that might make a good short candidate:


CRS had a nice breakout a few weeks ago, but this breakout seems to be losing steam in a big hurry. Failed breakouts make great shorts.


Much of the housing sector - - lenders such as AHC as well as builders like BZH - had a nice bounce higher today. I took it as a good opportunity to enter some shorts of stocks that were retracing their head and shoulders pattern to the neckline, such as ESS, shown here.


Honeywell (HON) is starting to lose ground.


....as is Microsoft (MSFT)...


A couple of long suggestions. JetBlue, mentioned here not long ago as a potential buy, looks good. A series of higher lows and agreeable volume trends make this a handsome candidate for puchase.


And Questar (STR), also mentioned in the past, continues to prosper after its well-formed breakout.

Twenty-Five-Peat

Yawn. The bull's getting boring. By my count, 25 out of the past 31 days have been up on the Dow. So much for climbing a wall of worry. It's skipping higher.

I mentioned yesterday that the US Dollar had to soften up to have any chance of market softness. Although it didn't help today, I notice the NZD/USD did weaken considerably and is sporting a pretty hefty bearish engulfing pattern.


One nice effect this did have is to soften up gold quite a bit. My $XAU puts continue to do well.


Apple traded over $100 for a while today, its highest price in history. I remembered Dell's famous quote in the late 90s about how Apple should just give up, so I decided to look up when he said that. Well, fancy that - - right near the bottom. Buyers of Dell on that day would have about 140% in profits by now. Buyers of Apple, on the other hand, have enjoyed more like a 1,600% gain.


Akamai, a short suggestion here, continues to fall on very significant volume.


I sold American Airlines (AMR) short yesterday near its high for the day, and it is sinking nicely away from its neckline. By traditional measurements, there could be another $9 in losses on this stock.


I've never charted Honeywell (HON) here before, but it's a Dow 30 stock and worth watching. No clear bearish pattern here, but clearly an opportunity for it to take a breather.


I've mentioned in the recent past how McKesson (MCK) is dancing around its Fibonacci fan lines. At long last, it started to fall away from one of those lines today. It took a while.


Morgan Stanley (MS) represents a relatively low-risk short here, since it has apparently retraced about all of the descent that it is planning to retrace.


PSB, which I've been short a while, continues to slowly form a potential head and shoulders pattern. So far, so good.


Questar (STR), mentioned several times recently as a long candidate, moved handsomely higher today.


In honor of Steven Hawking's planned adventure in weightlessness, I thought I'd share this funny (but slightly NSFW) clip.

Yeeeeeech....

You can thank the good people of United Airlines for my ability to get this post done relatively promptly. My brief flight from Seattle to San Francisco has been delayed three hours. So here I sit on the plane, waxing poetic about this insane market.

By the way, does anyone find this image from the login page of TMobile to be strangely suggestive? (Long, uncomfortable pause). No? I guess it's just me.


Here's the NZD/USD - - what I have to say about it is basically the same as what I've got to say in the next paragraph.....


As long as the dollar remains weak, there's going to be yet another reason for stocks to go higher. Looking at the EUR/USD chart, it's clear that we're at an extreme point, but (obviously) it could push to yet another extreme. This chart, in case it's not clear to you, shows the strength of the Euro (and, conversely, the weakness of the dollar), so mentally invert it.


What's interesting about the market is just how swiftly it has pushed higher. Look at the chart below. I've highlighted each of the most recent three "surges", and as you can see, each surge is happening with greater speed. The two lonely down periods here were last summer (oh, how I miss those days....) and - ever so briefly - about eight weeks ago.


The NASDAQ Composite is still within its rising channel, at the tippy-tippy top. Clearly Apple's (AAPL) sensational earnings will push both Apple and the NASDAQ higher first thing in the morning.


The S&P 500 is clearly above its channel. An overshot, or a whole new ball game? Search me.


If you want a truly bullish picture of the market, take a step back and look at the long-term $XMI. This is a chart of an amazing breakout, a perfect pullback, and a subsequent push to new highs. This is exactly what bull markets are made of. Astonishing.


I have suggested Akamai (AKAM) as a short before. It didn't really perform until today.


I like looking for weak stocks on a day like today, because if a stock can't get it up on a day like this, it's in sorry shape. Check out ATI.


Same goes for Colgate, which actually opened higher. Look at the honey of a bearish engulfing pattern on this one.


CRS, mentioned here yesterday, is failing its breakout, and it fell today on strong volume.


Dril Quip (DRQ), mentioned in this blog before as a buy, continues to perform well. Just about anything to do with energy (either classic or alternate) seems to be zooming these days. I can at least take heart that I am in a natural gas partnership.


General Dynamics (GD) looks like a potential short. It busted its trendline a number of weeks back, and it seems to have double topped today, falling when everything else was rising.


I don't have any particular opinion on GOOG, but it only rose one tenth of one percent today - - pretty feeble, wouldn't you say? I think it may be telling. I'd also point out that all the gains from its fantastic earnings report a few days ago have vanished. Everyone who bought into that rally - even at the day's low - is in a losing position now.


I like Southern Copper (PCU) as a short at this price.


Schnitzer Steel (SCHN) - - man, can you imagine being the receptionist there and saying that name all day long? - - continues to look fantastic as a bullish play. Wonderful strength on handsome volume.


Questar also looks good on the long side.


Given today's action, I'm glad the readers voting to take anonymous comments down. You can imagine what much mud slinging would be going on right now.

Energy's Strength

It's true - the market (as measured by the Dow 30) was up for the 8th day in a row today. This hasn't happened since 2003. So the press is all over that.

Less touted is the fact that today, for instance, the Dow was up all of 4.71 points. In percentage terms, that's the equivalent of a person with a six-figure income rushing home to tell their spouse their gross salary is going up $37.45 per year. Whoo hoo!

One quick note on American Home Mortgage (AHM) before we get started in earnest..... the stock continues to tumble. The tough part - and this is always much tougher than picking out opening positions - is when to close it. I took a look at a long-term chart, and the next really meaty support level is literally in the $6.50 to $7.00 range. Does that mean the stock will go that low? I have no idea. But this short position looks even better today than it did yesterday.


As for the market in general.....same story from me. Take a look at the DIA graph below. The bulls just keep wrenching things higher, but we're still below that busted trendline. Looking at this one graph, it seems the bulls are losing steam. But we know how easily they can recharge those locomotives, don't we?


I've been impressed and surprised by the strength of energy stocks. I have a substantial investment in natural gas fields, so I'm happy to see NG prices creep higher. But my feeling a few days ago that oil stocks were topped out was off the mark.

What's tough about buying into hot stocks is that it's difficult to see them going higher. But they often do. Here's a great example....Entergy (ETR), shown below, had pushed into a new high of about $78. Not that many months before, this has been a stock trading in the high 20s. It's hard to get excited about getting into a stock that has risen hundreds of percent like this.


But look what happened after the breakout (shown with the same horizontal line). This sucker just kept climbing. I admit that I am lousy about getting into stocks pushing into new highs.....it just seems too risky. But the fact is that this is how fortunes are made. Technical breakouts on strong volume often indicate many more gains ahead.


But when thinking about energy stocks, it often helps to at least have a passing awareness of what the commodity itself is doing. The main one, crude oil, has a long-term chart shown below. Obviously oil has had an amazing push skyward since the late 90s, blasting off about 600%. I'll leave it to you to decide where you think oil might go next. I truly have no strong opinion.


Looking closer, it could be argued that there's a head and shoulders pattern in the recent history. Not a textbook-beautiful one, but a visible one nonetheless. That would suggest future weakness. But, again, I truly have no strong view on where energy prices might be going.


Having said that, here are a few energy-related stocks with impressive charts. Dril-Quip (DRQ):


Schlumberger (SLB):


And Questar (STR).


A couple of mentions that are not directly energy-related.....first, I got bounced out of Continental Airlines (CAL), but I'm still eyeballing it. I've inched the neckline up a bit to accommodate the price move. This is not as clean a pattern as it was, but it's still worth watching.


Lastly, Sears Holding (SHLD) continues to be amazing (for bulls). I've mentioned this beautiful cup with handle pattern before. I have no position in it now, but if I were long, I would be delighted. This is an amazing-looking chart.


That's it for today. Let's hope the market gets a little more interesting soon. Otherwise, we'll have a 9th up day in a row, and it'll be +0.35 on the Dow.

Bearish Hopes Battered

I'm not even waiting for the end of the trading day to do this post.

Now that the indexes have sliced through the highs of March 26, bearish hopes for a softer market are - for the umpteenth time - destroyed. At this point, only surprisingly weak Q1 earnings........or a totally unexpected world event....is going to slow this market down.

From a charting perspective, the market is in full-blown bull mode, with the only resistance being that major support line that was decisively broken in late February. The market certainly still has more room on the upside.


Since I'm weary of showing potentially bearish charts that get swept up in this bull mania, I'm going to switch hats and offer a few bullish ideas. Dril Quip (DRQ):


Greif.....just look at that volume surge.... (GEF):


Health Net (HNT):


Holix (HOLX):


Jacobs (JEC):


Schlumberger (SLB):


Questar (STR):


I'm sure the naysayers that hang out in the comments section are delighted at the misery of the bears (and, more specifically, me!) Well, that's the market for ya. 99 times out of 100, it belongs to the bulls. Days like February 27 come along only once in a blue moon.

I hope some of you find some good fodder in the charts above.