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.

333

OK, I'm starting to enjoy the market again. Four down days in a row. Granted, only two of them were worth anything (today and last Friday), but I'll take what I can get. Red on the screen, and I'm a happy guy.

Today was actually my second-best day ever in percentage terms, and it wasn't even down that dramatically. It's finally becoming clear to the public that the economy is faltering. Bring on some more of that! I guess I'll only regret it when I try (again) to sell my second house here in Palo Alto, The market has become mushy around here, and I gave up selling it a few months ago. I was going to try again in spring, but if things keep going this way, I may wind up as a landlord far longer than I ever intended.

Many months ago I suggested ESRX as a short. It's worked out nicely. It never violated the stop price I suggested, and those owning puts have made out like bandits.


The NASDAQ is looking particularly squishy these days, which is terrific. Take a gander:


Similar action is on the $NDX. You can see a nice progression of lower highs here, and today's downdraft was a monster bearish engulfing pattern.


Also take note of just how quickly the air has come out of the S&P's RSI indicator. It's fallen from nosebleed levels to well under the important 70 line. Let's keep beating the spirit out of these bulls, guys 'n' gals. Shake them and break them.


I loaded up on $XAU puts early today, when it was high. It closed pretty much unchanged. This isn't a clean head and shoulders pattern per se, but it's got the markings of one. I like it.


The Fib Fans on ADSK are charming, to me, and it's got a nice, clean stop. Ummm, keep in mind that tight stops can get ignored by giant gaps up, such as I experienced with Cigna (CI) today. It basically opened at its high and fell the rest of the day. Grumble. But I digress.


I've been holding AGN puts for a while. Nice one.


For those wanting to take advantage of the sky-high REIT market, may I direct your attention to ARE?


ATI looks to have put in a lovely double top.


Capital One (COF), mentioned here on numerous occasions, is behaving like a good boy should.


NOV is a nice play on the OIH drop.


Finally, someone mentioned US Steel (X). I bought puts on this a couple of days back. I like what I see here.


In closing, I just want to say thank-you for the thank-yous. There are a lot of nice notes in the comments section, and believe me, I don't do this blog for the money (averting eyes....) I do it for the love! So I appreciate the nice words.

La De Da

It seems a tiny passenger plane accidentally running into an apartment building has more import to the world financial markets than a crazed dictator with nuclear arms. Go figure.

I thought we had 'em today, but the plunge protectors (or whoever.....) pushed most of the losses off the Dow. Phooey.

I had a great day with Legg Mason (LM) and, generally speaking, things were pretty good. I humbly offer up a few suggestions for shorts/puts, simply because I'll never wise up........

Alcan (AL), a lovely head and shoulders pattern....


Alexandria Real Estate - - many REITs have similar charts (symbol ARE):


Cleveland Cliffs (CLF), a nice Fib setup:


Lehman (LEH):


Nike (NKE) way at the top of what looks like a massive distribution:


Textron (TXT):

Nothing to say about the markets that I haven't already said. Best of luck to ya.