Oh, Baby...........

I'm feeling a terrific sense of control over this market (at last). Recently, I've been doing extremely well. Even with intraday trading, I'll buy calls at just about the bottom, sell them at just about the top, then buy puts, and then ride those all the way down. I'm rarely this "in synch" with the market, but it's been a good feeling.


I noticed that Barron's this week features Blackstone's CEO on the cover, pointing out that a massive public offering of the largest private equity partnership clearly signals the peak of these beasts. I couldn't agree more. Oh, let's check in to see how the public's investment in the two-day old Blackstone has been faring.......


Of course, the big news today is that today's bounce from last week's downside action completely evaporated. The Dow surged 120 points higher (and I profitably closed out some calls I bought earlier in the day, then gobbled up a huge number of puts), then the entire gain by blown to smithereens. As you can see from the Russell, the medium-term trendline is now broken.


About half an hour before the close, I sold all my puts (DIA and $RUT), since I felt the selling was - - at least very short term - - overdone. Here's the S&P 500.....


In a broad sense, I think things have changed. It's been horrible awaiting the change, but I think it is finally here. In the broadest view, I think we have witnessed the passing of the Mother of All Double Tops.


This is not to say I'm speculating on outright collapse from here. On the contrary, I think we're probably due for another bounce up. But - as with today's - I may well decide that the bounce has exhausted itself just a couple of hours into a single trading day. My portfolios are devoid of any index positions right now, and consist of carefully-selected equity shorts, equity puts, and a couple of longs (DXD and BBI).

If you're just dying for a bullish stock, AutoDesk (ADSK) looks interesting:


Real estate has been in a freefall for months. I was thinking it would stabilize. But we might be in for some more downside action. Apartment Investments (AIV) has an impressive head and shoulders pattern.


My short in BEAS had a good day. I've put the clearly defined support and resistance horizontal lines here.


Bear Stearns was the "culprit" behind today's fall. I've been mentioning this as a short (or put purchase) for a long time. You can plainly see how, after its fall from its ultimate high, it tried to retrace........but the jig is up, and it's been falling ever since.


Looking at a broader chart, you can see a major, major supporting trendline has been shattered.


Goldman Sachs - employer of the hottie pictured at the top of today's entry - is suffering as well, although not to the same degree. My puts in this are up, and there's plenty of downside left on the stock, tinted here.


Another set of puts that's doing great is JC Penney (JCP). I've illustrated a potential target. Thank you, polyester! Thank you, leisure suits! Thank you, lawnmower care supplies!


Massey (MEE) is sporting a monstrous, gorgeous head and shoulders, and I think the retracement is complete now.


A bunch of people have written me asking to explain some options trading basics. I'll do it on a quieter day when the market is up half a point or something. I've had enough. I'm going for a swim........

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:

...And an Awful Lot Like Me.....

First off, if you didn't get around to reading yesterday's post, you should. It rules.

The trend change that I have been hoping, praying, and wishing for might (I say MIGHT) be here. Whether it is or not, the past week or so has been very good to me. Successful trading comes with its own set of challenges, but I'm enjoying myself. Watching the Dow go from a 90 point deficit to a 20 point surplus today, I had the sense that it was time to get more puts. And that was the right move. Lower lows and lower highs seems to be the rule of the day.


The "culprit" of all this wonderfulness is soaring interest rates. One reader (who shall remain nameless but I shall refer to as SuperCOT COTLover) opined that interest rates aren't going to go up forever. Well, ummm, that's right. But they weren't going to go down forever either. Believe me, there's plenty more that can go wrong to help add fuel to this wonderful fire.


Someone else asked to see my positions. Anyone blinkered enough to spend time every day sharing his best charts and thoughts for no money is stupid enough to show all his positions too, so here goes (the bold items are puts; everything else is a short):


Remember that channel I mentioned yesterday for the Russell 2000? Well, it was cracked today. Good.


And the S&P 500, which had been floating above its channel for a while now, has now achieved - if you will - double penetration. The index is within the bounds of its channel once more. Which only means it is at the very highest reaches of its channel, with ample more room to fall.


And, not surprisingly, the $VIX has been zooming higher lately. Even at these levels, we are far, far below historical averages. During saner times, the $VIX would occasionally push above 50.


ALB, which I've been short for a while, has now completed its pattern. Huzzah!


Oh, remember back on May 22nd that I suggested BTJ as a short? I've marked it with an arrow here. How's that for a call, folks? I (stupidly) closed it out a couple of days ago for a nice profit, but, again, it was just stupid. There was no solid reason to cover the position.


CAM is another one dozens of great short/put candidates.


And the DIA is a great general way to play the market downturn via puts. This is a gorgeous chart. Stop price of 134.76 on this one, if memory serves.


My puts on GOOG are doing well. This is a failed breakout pattern. For such an expensive stock, there is nothing sweeter.


I'm avoiding real estate shorts, pretty much (I've got one or two). Looking at IYR, it is approaching a supporting trendline. Of course, if you read about the billions upon billions of dollars in mortgages that are about to explode, it could be that the real estate downfall has only just started trickling in.


My JCP puts are doing well, although his pattern is not complete yet. But it has a very good shot of doing so.


Check out Sears Holding (SHLD). It has crossed its 20, 50, and 200 day moving averages! Now the fun can really begin.


And for all those who used me as a contrary indicator........keep holding those positions, boys. I'm sure you're right and they'll be back in the black in no time. In fact, double up. You know I'm wrong.

XTC........

Animal Mother

I am channeling Animal Mother. Bulls, you have a real chance of losing control. Stay sharp!


Some folks (well, one - Health Affairs - only God knows what on earth that name is supposed to mean............) suggested I would falsely claim I called the fall. I didn't call the precise fall (otherwise I'd be on Time magazine), but, come on, I gave some pretty clear warnings.

On Saturday, my entry was appropriately entitled, "I'm Starting to Like This Market". I wrote:

The Russell 2000 has been unkind, but I think we're over the worst of this. Here is a sixty day intraday graph; the head and shoulders target of 30 points to the upside has been plainly reached. Clear as a bell.

On Monday, once again, an appropriate title - "Crossroads" - where I wrote:

Accept my good wishes that the higher highs/higher lows pattern be broken in the coming weeks. The bulls must be conquered, and breaking the pattern is the first step in breaking their spirit.

Finally, after the fall, on Tuesday Night...

...as for tomorrow - - again, I haven't looked at a single chart yet, but my early guess is a quick drop in the first half hour and then a big rally afterwards. Not hundreds of point, but maybe 100.

And what, dear readers, did the market do today? There was a quick drop in the first half hour. And then it rallied 100 points (well, 137 at its peak, but you get the idea).

Let's turn to the delicious Abby Joseph Cohen and see what she had to bark today......(this is just an image; don't bother clicking on it for the video; you have to go to cnbc.com for that).


In the video interview I watched (on perpetual rah-rah CNBC, which I never, ever watch, except in the rarest of instances), she stated that the market's "valuation, if anything, has gotten a little bit better". Yep, if you liked the Dow at 12,700, you'll love it at 7,000. She goes on to say that she (it is "she", right?) is targeting a 10% increase this year........and that's conservative....."assuming a deceleration in ...profit growth..."

AJC says of the U.S. equity market......"our market is underpriced....[and represents] very good value." Of course it does, you devilish temptress! The interviewer asked her what, if anything, would give her concern about the market. Her multi-million-dollar a year answer? "Events within the economy." Well, my scrumptious little sex kitten, you certainly know how to earn your keep. Rorrrrwwwww........

Let's put our brains back in and get serious. How high will the Dow go up (ahem - "recover" - - from the "correction") before we get a chance to really rake the bulls over again? Cast thy eyes this way:


.....and this.......


........and this.........


The $VIX pulling back to the horizontal line shown would make things more tempting. My God, the bid/ask spread on S&P options today was wider than Al Gore's waistline. (I think the man has decided to consume - live - anyone not living green. Notwithstanding his $30,000/year house bill on electricity and gas).


I'm going to break form and offer a few bullish ideas. Now, don't get me wrong. I don't actually buy any of this crap. I just get sick of being called a permabear. So I grit my teeth and throw some buys out now and then. Here's ABT:


LEH pulled back beautifully to its fib fan:


And SHLD, which I've mentioned repeatedly, remains a handsome graph:


I received many, many emails over the past 24 hours thanking me (some just in general, others with multi-hundred percent gains from my ideas). One kind gent even sent me a video. I share it with you now. Here, my friends, is how the bulls are coping with the market. (Although the bull is disguised as a giraffe here):

Deconstructing Barron's Roundtable

Today was a good day. All my portfolios went up. The NASDAQ got clobbered. My AAPL puts went up, since Apple had blow-out earnings and still managed to fall hard. And IBM announced great earnings this evening, only to have its stock get whacked. Having stocks fall on great news makes my day.

But enough about me. Let's make today about the Barron's Roundtable, where a dozen market "experts" talk about - - invariably - - how much higher the market is going to go.

I love Barron's dearly, mainly because it had the good sense to give my start-up (Prophet.net) the "Best of the Web" award four years in a row. But I take issue with their roundtable for a couple of reasons.

One is that they tend to have the same clowns back each year, including the singularly nauseating Abby Joseph Cohen. I don't think the fact she is so physically unattractive to me would grate so much if she weren't so bullish all the time. Oh, by the way, here's the roster:

Art Samberg, Chairman and CEO, Pequot Capital Management, Westport, Conn.;

John Neff, Retired portfolio manager, Vanguard Windsor Fund; managing partner (retired), Wellington Management, West Conshohocken, Pa.;

Marc Faber, Managing director, Marc Faber Ltd., Hong Kong;

Scott Black, Founder and president, Delphi Management; portfolio manager, Delphi Value Fund Boston, Mass.;

Meryl Witmer, General partner, Eagle Capital Partners, N.Y.;

Oscar Schafer, Managing partner, O.S.S. Capital Management, N.Y.;

Archie MacAllaster, Chairman, MacAllaster, Pitfield MacKay, N.Y.;

Felix Zulauf, Founder and president, Zulauf Asset Management, Zug, Switzerland;

Fred Hickey, Editor, The High-Tech Strategist, Nashua, N.H.;

Abby Joseph Cohen, Chief U.S. Investment Strategist, Goldman Sachs, N.Y.;

Mario Gabelli, Chairman, Gamco Investors Inc., Rye, N.Y.;

Bill Gross, Founder and chief investment officer, Pimco, Newport Beach, Calif.

The second thing is that Barron's shows the tables of how the past picks of these experts have fared. That's just fine, except for the fact that for the one or two members who actually have the gonads to offer bearish opinions, their picks are shown as negative values if they do well. In other words, if a short suggestion goes from $100 to $50, the column showing the percentage performance is -50%. I imagine 95% of the readers skim the % column and, seeing the negative numbers, figure the person who made the call it a nit-wit.

The proper thing to do would be to show the true return so that people are comparing apples to apples. This is just example 5,739 of how the world hates bears. They can't even give credit where credit is due.

Oh, there's a third thing I don't like about how Barron's shows this information. They don't even show the average return for the picks! Some people have five picks, others ten, others three.........but they don't bother to show the average return. Is that idiotic, or what? I mean, how is anyone supposed to judge how decent these overpaid people are?

Well, Tim to the rescue. I've punched in the results for the roundtable picks of 2006. And I have - gasp - actually computed the average returns of the picks. They are, in descending order, as follows:

Meryl Witmer: 60.26%
Oscar Schafer: 34.36%
Art Samberg: 30.7%
Scott Black: 28.55%
Marc Faber: 27.86%
Felix Zulauf: 27.38%
Mario Gabelli: 20.16%
Fred Hickey: 18.18%
Abby Joseph Cohen: 17.55% (pfftt..)
Bill Gross: 17.3%
John Neff: -8.6%
Archie MacAllaster: -13.25% (go get 'em, Archie!)

Keep in mind two things. First, these people are, by and large, paid millions and millions of dollars. Second, the market was up about 18% last year. So hottie AJC got paid a bundle for doing.........ummmm..........well, I'm not sure.

I would also add that the results for the roundtable's mid-year picks are also available. Fred Hickey - - just about the only bear in the group - - scores a nearly 20% gain on his picks (and the market went straight up during the second half of last year!) Whereas all three of Abby Joseph Cohen's picks fell in price, averaging a nearly 12% drop. Nice going, Abs. Way to earn your millions!

So there you have it. The experts. The bulls. The unjustly rewarded. How these people can to be in such positions of authority is quite beyond me.

Buy Buy!

Two days into 2007, and each of them an up day on the Dow. The bulls are still having their fun. Granted, both days combined don't even equal 20 points. But the bulls are still lovestruck.


OK, that probably woke you up. I hate to be punitive, but no one commented on my gallery of Worst Album Covers yesterday, so I wanted to supplement them.......from the pious.....


...to the romantic....


...to the deepest male emotions.....


....to Ken.....by request. I imagine this is simple a blank vinyl disc.


ABT looks attractive as a buy. This market is really overpriced, I think, but this is still a handsome chart.


HAL, on the other hand, is more symbolic of what's happening. Broken trendlines, weakening stocks, all masked by a strong megacap market


I'm starting to lose faith in GOOG (and RIMM) as shorts. Today was a very strong day on both counts. I've marked by stop-loss price on GOOG here.


DST is sort of fascinating in how it shows trendlines "changing coats" from support to resistance. This kind of thing happens all the time.


BLUD, which I've mentioned many times before as a long, continues to be fantastic. Just look at this strength.


BAC, Bank of America, seems a possible attractive short as it seems to be changing direction here.


QID, the double-inverse NASDAQ ETF, is fascinating in the sense that volume is exploding and the price is finally turning around. Hopefully this is the shape of things to come.


OXY is a good representative of the weakening oil stocks.


Whereas the broad OIH continues to falter. I've been bearish on oil for a few weeks now.


HYDL, mentioned here as a short before, is also enjoying a downdraft.


Although I haven't mentioned HP (the symbol, not the company) in a while, this is a gorgeous example of Fibonacci retracements in action. Magical!


Finally, RTI looks like it may have put in a double top.


See you Friday afternoon......it'll probably be a late posting. It might not even happen until the weekend. But I'll get it done!