How Now, Mao Dow?

There was a time, not long ago (like, ummm, early last week) that I would have felt cheated and flustered by the Chinese market's tumble not having a bearish effect in the U.S. But at this point, I am so utterly distrustful (and numbed) by this market that I'm not at all surprised.

The Shanghai index fell the equivalent of over 1,100 Dow points last night, and our market - of course - went up. I truly believe - and I am seriously not exaggerating - that a nuclear bomb on a major city would not cause a major disruption in this bull market. I swear to God, this market is insane, and even the death of a million people would not stop it. It has lost its mind.

So. Having said that, let's look at a few charts.

Crude oil is pushing higher. Looking at the continuous futures chart, it seems to have plenty of room on the upside.


The strength in crude is obviously good for oil service stocks. The OIH is at a new lifetime high and had a very strong day today.


I mentioned last month how bullish energy looked, and stocks like Apache (APA) have been stars.


Conversely, companies which suffer due to high fuel costs got hurt today. My short recommendation of American Airlines (AMR) is doing well.


One I don't think I've mentioned in the past on the short side is BEA Systems (BEAS).


I have, however, mentioned Bunge (BG) a few times, and this one is shaping up nicely.


Capital One (COF) is sort of stuck right now. I own puts on it, and they haven't done a thing, but I am still hopeful about this position.


Federal Realty Trust (FRT - "don't giggle at our ticker, please") looks like a clean bearish trade to me as well.


I don't mention Google (GOOG) much, but this stock looks like a strong buy (yep, buy). This chart is strong, and the volume has been inching higher. Obviously this company is an ungodly powerhouse and is doing well at the expense of poor Yahoo, which seems to be dying an agonizing death.


I bought puts on Honeywell (HON) today. Maybe a lil' double top here.


The investment banks seem to be edging south, in spite of the market's continued strength. Merrill Lynch (MER) in particular looks good for a short play.

Profits in the Face of Gains

It was one of those nice days where the market went up but my portfolio went up as well (in spite of being completely short). Weakness in oil and gold were the reason.

Taking a look at the NASDAQ Composite, it's pretty plain that the market is at the upper boundaries of an ascending channel. Setting aside bullish/bearish arguments, don't you think it's time for the market to take a breather? Even if we're in a bull market for years to come, it doesn't go straight up. This graph alone should persuade you that it's more likely to ease off than push above the bounds.


The same argument, but for different reasons, applies to the S&P 100 ($OEX). Look how far above the 100/50/30 day moving averages the price is. It hasn't been this lofty since December 2003 (and you can see the softening that happened afterward). We've come very far, very fast.


As I mentioned, gold was weak today. I like how this graph is shaping up. The stop remains the same as noted earlier.


Now here's an interesting and unusual graph. I plotted YHOO and GOOG onto the same chart, each with their own independent axis. What's fascinating to me is that during the first half, the stocks tended to share the same fate. But during the second half, it's clear that GOOG has kicked YHOO's butt, and there's a growing rift between these two. Does it mean that GOOG will eventually "catch up" with YHOO by drifting down sharply? Or that YHOO is simply a company of the 90's and will never catch up again? Time will tell.


Now on to some specific short favorites. Here's AEM, which takes advantage of gold's weakness.


AL is a good play on weakness in industrial metals.


ARE is a very clean short in the world of real estate.


I like MRO as an energy short.


COF is shaping up nicely. I've mentioned this numerous times.


HYDL is another sweet looking short.


We're still in "a new high every day" mode. This can't last forever. You know that as well as I do.

Burying the Bear

See this towel? It's 100% cotton. And I just threw it in.

There's only so long we can pound sand, folks. Ever since July, the market has gone straight up. Iraq doesn't matter. The swing to the left in the political scene doesn't matter. The doomsday economic scenarios don't matter. There are way more buyers than sellers, and that's all the market needs to keep making new highs.

I had suggested recently that we probably should go back into our caves until the second half of January, at least. It seems that's probably the case.

I feel a personal commitment to doing a blog entry here each day. I must say, right now it's probably about as fun as someone doing a blog about the wonderful prospects of the Republican party. It's kind of a drag.

All the same, let's take a look. The NASDAQ Composite pushed higher today, and from a Fib retracement level, it's got plenty of upside left.


The NASDAQ 100 is just as disturbing. Just look at how much open air there is between where we are at and where we could go.


A closer look at the markets - this one is the S&P 500 - shows that you could basically put a ruler on your screen and plot the market from July 16 to the present. It's basically an unforgiving push higher.


The only bit of weakness today in the stock indices was the Dow Transports. It continues to not confirm the Dow Industrials strength. I'm sure there are some that could make an argument that Dow Theory is best left in the dustbin of history. I have no opinion.


Homebuilders were strong today, recovering from the collapse that everyone knows about. Here's BZH.


GOOG looks very strong. It has logged a new lifetime high, and this is a very nice looking pattern.


Redback (RBAK), which I've named here several times, continues to perform well.


If you're still looking for something to short, you might consider Yahoo (YHOO). This is a long series of lower lows and lower highs, and let's face it, Google has totally trashed these guys. Amazing that the Google guys wanted to sell out for a couple of million bucks to Yahoo early on. At this point, GOOG's market cap is $150 billion, compared to $37 billion for YHOO.