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.

Tasty Shorts

The market didn't do too much of anything today. Oil (and therefore OIH) softened up a tad, which is consistent with my speculation that the energy market is going to resume its downward movement. Gold, in spite of the metal's rise in price, softened too on the $XAU. The Dow just lost a handful of points. At least we didn't have some big 'recovery' day after Friday's nice drop.

I just wanted to share a few charts on which I own puts right now. Here's AMG. This pattern is basically in a "post-broken trendline" situation, which is a favorite of mine. The general uptrend has been clearly broken, and the stock has recovered partly or fully to the underside of the trendline. These often represent low risk/high reward trades. Let's call this kind of pattern PBT for the sake of today's entry.


LEN is just a nice topping formation:


NDAQ looks pooped:


TXT is another "PBT":


I've mentioned MRO a few times already:


Altria (MO), yet another "PBT", which seems kind of common these days:


The VIX went up some time, which is also consistent with my view that we've bottomed out on volatility and complacency. The market misbehaved badly in September and October (typically bearish months, yet the market went up) so let's hope the typically bullish months of November and December likewise confuse everyone! We bears could use a break. A sustained break.

Done and Done

OK, let's get this over with. Let the gushing begin. Fox News (with a custom-made graphic, no less):


CBS MarketWatch:


Forbes.com:


So, unless you missed it - - the Dow crossed 12,000. Finally. Whether this is a one-day wonder (which, as of this writing, it is) or a permanently new plateau of market strength remains to be seen. I was heartened to see that, in spite of the Dow's fireworks, my portfolios were holding steady. That's probably because the advance is so narrow, and most of the Dow's strength is coming from IBM. The fact that the NASDAQ is down on such a momentous occasion is interesting.

One reader wrote to me this morning and pointed out the gent (the one weighing less than 200 pounds) from yesterday's commericial bore a striking resemblance to Larry Kudlow. One of those separated-at-birth things. I am inclined to agree.


Of course, I have trouble explaining my fascination with the commercial. Perhaps it was the Ricki-Lake lookalikes that struck a chord. Besides being a little soft around the middle, I share with them the complete absence of any remaining dignity.

Turning our distended bodies to the markets, my gaze falls upon the NASDAQ 100. I dunno, to me this doesn't look like a market that's about to explode higher. Particularly since its larger brethren (the Dow) has been making such headlines of late.


Here are a few specific stocks I like (for shorting/put-buying, as you might guess). CBE:


CKFR:


COF:


Deere (DE):


FDX:


Monsanto (MON):


And Marathon Oil (MRO) which seems to be at an apex of sorts....


Sorry I didn't get to do a posting yesterday. I met a ton of people at the (regretably named) Money Show yesterday and wasn't in front of my computer until midnight.