Double Top

In honor of the late Anna Nicole Smith, we will direct our attention to another artificially-inflated bubble without much intellect behind it which no one thinks will die so young: the U.S. stock market.

The $VIX is forming a pretty decent inverted head and shoulders pattern. I've drawn the neckline here. Clearly it would be beneficial for the bears for the $VIX to push its way above this neckline, thus completing the pattern.


The S&P 500 remains beneath its broken trendline. The huge divergence between the price action and the indicator is quite intact, with today finally registering a small downturn in the market after several days of doing basically nothing.


Much the same can be said of the Dow 30.


John Deere (DE) is at the top of a sharping ascending channel.


And Cummins (CMI), mentioned here recently, has put in a possible double top.


I put Boston Properties here (BXP) not to suggest it, but merely to marvel. It's incredible - simply incredible. Much came be same for any of the components of the Real Estate group (wasn't there supposed to be a deflating bubble? Guess that's just residential....)


Bear Stearns (BSC) is finally losing a bit of its steam.


Aetna is obeying its Fibonacci retracement very nicely.


Reynolds Aluminum (RAI), also mentioned here recently, is dipping.


MTW seems to be in a series of lower highs and lower lows - often the makings of a good short position.


MTH looks like it has fully retraced to the neckline of its head and shoulder pattern.


And the same can be said of MDC.


The DJ Real Estate (IYR) equity is breathtakingly high - - which just goes to show stocks sometimes have no trouble defying their resistance lines!

Grease the Pig

The market tumbled about fifty points earlier today, but it recovered to close up twenty-five on the Dow. I think the bulls are trying to mount a comeback. We will see if the nascent lower highs/lower lows has any legs to it.

One market that intrigues me on the long side is oil (as a short-term play). I think the recent tumble has been fast, and the "common knowledge" that we're in a very warm winter has permeated the media so thoroughly that it strikes me as a contrary indicator. This minute bar graph suggests a possible consolidation, with a stop-loss price on the OIH of 128.94.


The market, as measured by the Dow Jones Composite, seems to be in a trading range, and today we were near the bottom of it. I wouldn't be surprised at all if, by and large, this was an upward-pointing weak.


The Dow Jones 30 has a clearer "lower lows/lower highs" pattern going on, although it's not been that way for long. I've tried to use arrows and circles to simplify the pattern.


The NASDAQ 100 also suggest a medium-sized trend change.


One index I'm eyeing as a short - - although I might let it ride higher for a bit - - is the Russell 2000.


The S&P 500, whose puts I sold early in the day for a nice profit, may have topped out recently. But - you know me! - the guy who predicted 17 of the last 3 bear markets! But even a bull would agree the past couple of weeks have been on the downslope.


Another indication that we may have a bit of an upsurge is that the $VIX is relatively high, based on the activity of the past couple of months. It has typically softened once it reaches these levels, and the market tends to swell higher during that softening.


I've just got three stocks I wanted to point out tonight. Autozone (symbol AZO) looks like a potential double top. I bought puts on this today.


My fascination with Google (GOOG) goes unabated. A petite head and shoulders seems to be intact here.


Finally, MDC, which I have been short a few days, is behaving nicely, moving away from its neckline.


I'll be traveling tomorrow, but hopefully I'll get time to post an update at the airport. Thanks for dropping by!

Beyond Good and Evil

Well, the day started off well enough. A nice initial wallop. Regrettably, the markets clawed their way back up to end in positive territory. Chalk up "Mini Asian Financial Crisis" as yet another thing the markets can shrug off as irrelevant.

Speaking of financial disasters that no one seems to care about, the Financial Report of the United States Government was issued recently. It's nearly 200 pages, but here are a couple of interesting bits:

Despite improvement in both the fiscal year 2006 reported net operating cost and the cash-based budget deficit, the U.S. government’s total reported liabilities, net social insurance commitments, and other fiscal exposures continue to grow and now total approximately $50 trillion, representing approximately four times the Nation’s total output (GDP) in fiscal year 2006, up from about $20 trillion, or two times GDP in fiscal year 2000.

and.......

Given these and other factors, it seems clear that the nation’s current fiscal path is unsustainable and that tough choices by the President and the Congress are necessary in order to address the nation’s large and growing long-term fiscal imbalance.

I found the graph about the Medicare gap particularly interesting. I don't think I've ever seen a y-axis before which measures "billions" of dollars with figures such as $16,000 (e.g. Sixteen Thousand Billion - - otherwise known as Sixteen Trillion). Umm, we are hosed, people. Wake up!


AIV is representative of many REIT stocks, all of which are softening like butter on a midsummer's day.


BAC looks like the uptrend is over.


BLUD, one of my few long suggestions, is still looking mighty purty.


BZH, another long suggestion, seems also poised for a rise.


Although I'm uncertain as to where gold is heading, GFI looks potentially bullish as well. (Wow, three bullish mentions in a row.......)


MDC is easing away from its retracement nicely.


.....as is old favorite MTH.


Many people have asked me to look at QID. I own this now. It doesn't have much of a history to it, but it's a nice double inverse play on the Nasdaq. And check out the volume!


RIMM, which will give everyone a quarterly update after the close Thursday, is starting to slip-slide away again.


And SHLD, long-watched but seldom tried, is looking mighty mushy.


It was disappointing, of course, to see how boldly the markets fought their way back today. The bulls have had a dynamite year (and the dynamite was placed directly under our paws). I guess they're just going to keep pouring salt in the wound until Dick Clark's ball drops at year's end.

The Stalemate Continues.........

Twelve stinking points. That's all that got lopped off the Dow after the Fed announced no change in rates (as everyone expected) and that inflation was indeed still a concern.

The intraday chart below shows what happened. After a nice pre-announcement drop, people sort of clung to their chests until the announcement, at which time the market did its usually insane up-and-down which-way-is-up madness. Most of the day's earliest losses were wiped clean.


I took a snapshot of $MSH earlier in the day since I thought it was worth considering as a short. Keep it on your radar screen.


The $OEX is sporting a big ol' hanging man for today. These don't happen that often. Just try to find another one that's even close on this chart. These usually suggest tops. Of course, we're in a market where bad news is good news and good news is great news, right? So - - the hanging man will probably muscle the noose off his neck, jump to the gallows, and start twirling around with an exciting Up With People dance.


As I've mentioned, the Transports are the only really bearish index with us, and it continues to behave nicely. Thank you, Mr. Rail.


Just to get an idea of the quagmire the market is in, look at the American Stock Exchange Major Market Index. Four days in a row of virtual carbon copies. Booooooooring!


I haven't shown my positions in a while. I've trimmed this a lot from the days of holding eighty positions! I'm much more into cash now, as this market continues to idiotically lurch higher.


Now - some individual stocks. Conoco (COP) seems to be a safe bet, as it is at the top of a well defined trading range. As always, though, upside breakouts can and do happen! So be careful.


This one isn't a short or a long - just kind of a puzzler. One of the strongest stocks lately has been Campbells. That's right - soup. Consumer Defensive plays are all the rage, I guess. I guess I've been in the Silicon Valley too long. I find it curious how people can get all excited about someone who puts alphabet soup into a can and sells it for 79 cents.


Google (GOOG), one of my more speculative put positions, is weakening a touch. Using my employer's "three arrows" method, we can see here that we've got a triumvirate of down arrows.


Goldman Sachs is my favorite investment bank short right now.


Heinz is another one of those "huh?" stocks, like Campbells. Ketchup. I guess it's all the rage.


MDC has retraced to its neckline nicely. I don't love this enough to make a position out of it, but it's well worth considering.


Merrill Lynch is a sky-high pattern which I've also secured as a short position.


Meritage (MTH), mentioned here many times in the history of this blog, has also retraced to its neckline.


I have not touched OIH for a while. I had a great time with it during the summer. It seems to be at a real stalemate right now. We're all just watching it for a breakout in either direction. I am guessing down. Surprised?


Fred Hickey is one of the few gurus I really enjoy reading. He had a really interesting mention in this week's Barron's where he was slamming tech stocks. One of his short recommendations is one on which I own puts, Research in Motion (RIMM). The article says, in part:

"In an echo of the 2000 tech mania, the analysts covering Research in Motion don't seem to be fazed by the fact that its market cap is now up to $26 billion, or 11 times sales." He notes, in contrast, Motorola (MOT), the cellphone giant and a key competitor, with sales of $42 billion, versus $2.4 billion for Research in Motion, yet its market valuation is only two times larger and 1.3 times sales. Palm (PALM), another competitor, sells at less than one times sales. Fred's calm assessment: Research in Motion's "valuation is certifiably insane!"

Lastly, Tesaro (TSO).


On what can we pin our dreams next? Crappy retail sales? That's tomorrow morning. Hope springs eternal in the bearish breast!