Bad News Bears

Today started off well enough. The market's modest rise in the morning got blown to smithereens by the drop in housing prices (for the first time in 11 years), and oil services was down hard. It was enough to make a bear's heart go pitter-pat.

Sadly, the bulls took charge and stampeded most of the day. The Dow was up over 100 at one point, although it eased back to close up "only" 70 points for the day. OIH, $OSX, and other oil-related stocks formed hammer patterns, signaling a short-term bottom. So what started off as an "A" day wound up a "C-".

Let's take a step back and look for the past decade at the Dow 30. You can see why people don't really know what's going to happen next. We're at the very top of a large upside-down triangle. Busting through lifetime highs would take ungodly strength (and would cause me to jump off the nearest bridge). Sinking into another stairstep-down pattern seems completely elusive at this point, although that's the only thing that will make this "our" market.


The SPX, a broader index, isn't nearly as close to its lifetime highs, but it certainly received the "all clear" signal from the bulls today. There is a meaningful amount of upside between the current SPX price and the next Fibonacci retracement level. That isn't good news for us bears at all. Today is the kind of day that shows the bulls are still firmly in charge, even in September, historically the weakest month of the year.


The $OEX is pretty much perfectly at the 50% retracement level.


The $MID to me is looking sort of alluring as a potential put purchase. The stop price is pretty tight. Mind you, today's action is not encouraging. But if it's a one-day wonder, looking for shorts at these lofty levels is a good exercise.


One honest-to-goodness down market that's been really good to me lately is oil. The $OSX, shown below, is very similar to the OIH, and you can see its squeaky-clean head and shoulders pattern. Things might have bottomed out for the short term (like the next week or so), but it's been great so far.


I recommended Massey Energy, for example, weeks ago. It has taken a terrific tumble.


But take a look at today's candlestick pattern. A honkin' big hammer. That spells short term bottom to me.


The NASDAQ 100 is extremely close to the make-or-break point for bears. Crossing above the line shown here would spell bad news for at least a little while for the bears.


Hilton (HLT) caught my eye today as a short candidate.


As did NOV, which is in my (obviously) favorite pattern, the H and S.


For those skeptical about the still sky-high REIT market (in spite of all the bad real estate news), take a look at SPG.