Post Number D

Well, this is it.......my 500th post to this blog. I would have hoped for some kind of momentous occasion (like a corresponding 500 point drop on the Dow), but it was not to be. I never thought I'd be writing this blog for this long considering its humble beginnings as little more than a personal diary back in March 2005.

For anyone who has read my blog even a little bit, you know I'm a relatively incurable bearish sort. As such, the past couple of years have been rough sledding for me and other bears. Although there have been glimpses of hope (such as the early summer of 2006 or the brief plunge in February of this year), the market has, since October 2002, been owned and controlled by the bulls. Period.

Markets weren't always this way. Looking at over 80 years of the Dow in the 20th century, you can see a pretty even distribution of bullish years and bearish years (the latter shown in red).


But the past quarter century has been quite different. Offer any reason you like - globalization, mass credit, the benefits of computers - it hardly matters. The fact is that a down year in the stock market has become a rare exception.


And of course, the king of all bull markets, China, shows no sign of slowing down. The hiccup in February is becoming a speck in the history of this market. Except for a small ETF position now and then in some related Asian market, I stay far, far away from China (either bullish or bearish). It's a bubble that no one knows where or when will burst. A true bear market could be years off.


Closer to home, the Dow inched lower today, and a potential double top remains in place. Of course, one strong day could pierce that possibility instantly.


Most U.S. equity markets have a strong resemblance in that, over the past couple of months, volatility has increased (judging from the technical indicators), even as prices have plateaued into relative quiet. Here's the S&P 500......


And a very similar reading from the Amex Major Market Index.......


Today was a pretty hum-drum, do-nothing day, but there were pockets of interesting stuff. ALB, a short of mine, cut beneath its neckline nicely.


BTJ, another short, rose some. But I'm still feeling good about this chart.


Another short, Constellation Group (CEG), eased lower, and the reversal in trend seems convincing.


Housing stocks seem to be rather stuck, although they pushed down somewhat today. ESS is one of them, shown below. Many housing stocks bear a resemblance of this head and shoulders (ish) pattern, but the firmness seems peculiar.


I don't think I've mentioned Entergy (ETR) in a while. I entered a new short position on this today.


JC Penney (JCP), on which I own puts, also eased beneath its neckline (finally!) today.


I toyed with the idea of making my 500th post my farewell to this blog, but I figured that would be a bit too Nixonian. Plus, I do like writing this blog, for the most part. It's an honor.

The main reason I keep writing it is because thousands of people show up every day (for whatever reason) to read what I've got to say. And we've got somewhat of a culture built up around this place. So I might as well keep at it. And, believe me, I'm grateful for your interest and readership.

And, after all, every dog has his day. Stay tuned.

Son of a (Triple) Witch......

Well, what a difference three days makes.

As of Tuesday's close, things looked just hunky-dory for the bears. Although such a rapid, 400+ point drop from the Dow certainly suggested it was time for a bounce up. But the very unresolved question is whether the bounce was the contratrend in the scope of a real downtrend, or whether the 400+ drop was no more important than the one from late February.

One trend is clear - - comments are up. Even with anonymous posters shut out of the comments section, activity has been ramping up in line with the market's volatility. Big down days bring out the snarling bears, and big up days bring out the told-ya-so bulls. Of course, beanie11111 alone was responsible for 15 of the prior post's comments, so a few people are largely responsible for the activity. (And Beanie - we get it - solar, solar, solar - enough!)


Looking at the $INDU, the best the bears can hope for at this point is a double top. A neat cascade of lower lows and lower highs simply didn't happen.......today's push higher broke that theory to pieces.


If the market does continue its descent next week, the Russell 2000 is, in my opinion, the best place to play it. Not only because of the relatively decent bid/ask spread, but also because it is relatively weak in its performance.


I don't think I've ever mentioned ACL before, but this looks like one which has turned the corner from uptrend to downtrend.


I got into a short position with BEAS today, and it's a bit in the green already, in spite of the market's strength. The right shoulder of this pattern is half completed.


I shorted BTJ successfully a couple of weeks ago. It has bounced high enough for me to be comfortable re-entering this short.


Cardinal Health (CAH), a short I got into a couple of days back, is doing pretty well. It is encouraging to see stocks act weak when the market as a whole is very strong.


Constellation (CEG) has a medium term downtrend that is intact so far.


One highly liquid, low-risk short (or put purchase) are the Diamonds (DIA). A clean stop here would be 136.84


Now that Goldman's earnings are out, I think the risk is much lower to short this stock. The blow-out earnings yesterday actually caused the stock to declined, and it seems toppy enough to me - and far enough away from the trendline - to warrant another attempt.


I first mentioned CRDN as a long back on May 3rd. Since that time, it has push much higher on very strong volume. I guess the war in Iraq is actually good for this firm.


McGraw-Hill (MHP) is a new short for me, entered yesterday.


I added to my MMM puts today, based on the big rebound in the Dow. It closed the day with a nice shooting star pattern and without penetrating its prior high.


I also bought puts on another megacap stock, AT&T (T).


The rails were very strong a couple of months back due to Warren Buffett's investments there. I think it's time to sell into this strength. I sold short a block of Union Pacific (UNP) today.

...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........

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.