Eight is Enough

Well, the octet of upswings in the market met a welcome halt today. Between the real estate market going down the toilet and the Fed gritting their teeth and confessing that the economy is starting to weaken, the market got the kind of one-two punch in the face it needed.

One catalyst for the drop in late February was the carry-forward trade. The NZD/USD nicely captured this (shown in green). As you can see, this FX has been pushing higher and higher (in spite of staying obediently below the broken trendline). A weakening here would portend good fortune.


Much of the indices resemble the NASDAQ 100 ($NDX), shown below - - basically, a slip from the huge upswing we've seen over the past six weeks (which I consider a retracement that will precede a much bigger drop).


My favorite index puts - the Russell 2000 - had a pretty good day. I've adjusted the stop to 816.13 on these.


And here's the S&P 500 ($SPX). Check out the RSI and Slow Stochastic indicators.


Gold & Silver ($XAU) seems to have reached the top of its descending channel. I've got a big block of puts on this index now too.


One of the most resilient indexes, the American Stock Exchange Major Market Index ($XMI), may have double-topped. I hope so, at least. God can't hate me that much.


A high-risk bullish play might be found with - believe it or not - some of the battered sub-prime lenders. Check out Fremont (FMT). The monster volume and triple bottom might mean a nice bounce higher. Of course, you could also wake up one morning and find one of these companies has declared bankruptcy, a la NEW. That's why I'm not going to touch it myself.


General Growth Properties (GGP) finally took a tumble on some very sizable volume. Lots of room left before it hits that trendline.


Tired old has-been Microsoft (MSFT) seems to have a nice H&S pattern.


NutriSystem (NTRI), favorite stock of departed commenter hurricane5, is again in my portfolio. No surprise here, folks - I've got puts on it. Another nice H&S pattern, in my opinion.


PSB continues to shape up nicely. I'm jumping the gun a bit on the pattern, but as long as it's shaping up as roughly drawn here, I'm a happy fella.


Reynolds (RAI) is finally started to sink. It's about flippin' time.


Someone commented that getting a long series of modestly down days would be better than one whammo day like we had on February 27th. I'm inclined to agree. But cruel fortune doesn't care. We simply have to take it a day at a time.

Stalemate

In yesterday's post, I laid out bullish and bearish arguments for the market, since we seem to be in one of those awful stand-offs between the bulls and bears. Today played out in precisely that manner.

The widely-anticipated jobs report came out. The results were interpreted as bullish. The markets zoomed higher at the opening bell. Fibonacci retracements were touched all over the place, and then the market started to soften fast. It went negative. Then positive. Then negative. Then positive. And finally ended with about 1/4th of the gain it had at its high point. Just ridiculous.

I'm 100% in puts and shorts right now. Below are my positions. Boldfaced items are puts.


Here's the Dow 30. You can see it bounces off that Fib beautifully.


And here's the Russell. For the second day in a row, it bounced off the fib. It actually managed to sneak across the line a little, but not for long.


The $SPX is pretty similar to the $INDU.


I've got a couple of long suggestions. Here's Bowater (BOW):


And, and even better one, Pico Holdings (PICO), which has the advantage of a big volume surge recently.


A few short ideas. BBD seems to have retraced within the Fib retracement nicely.


MS, like a lot of other investment banks, has likely retraced to an area where I think it doesn't have the strength to climb any higher.


Microstrategy (MSTR) blew me out a couple of weeks ago, but it was a one-day fake out. This one looks weak.


Options on the QQQQs have the advantage of being penny-priced, which is much more fair to traders.


Reynolds (RAI) is retracing back to its broken dome pattern. I also have puts on another aluminum stock, symbol AL, but the chart isn't as pretty.


Lastly, symbol RYAAY looks like a low risk/high reward short candidate.


My kids have given me some kind of bug, so I'm typing this with the chills. Even though it is 70 degrees outside, I'm going to go sit in front of the fire! Have a good weekend!

I See Debt People

I made a remark (shortly before last Tuesday's huge drop) that I was starting to feel good about the market again. I believe that even more strongly now. This market is actually starting to make sense again. And act rationally. And predictably (to a degree). Maybe some sanity is coming back.

I was also gratified to see that someone finally posted the first review on Amazon of my book. Those of you who have purchased it, please do the same!


Today's market reminds me of the contrast between fantasy and reality. See, the market people were all swept up with (until quite recently) looked a lot like this:


But the market I see (and, believe it or not, it's the exact same person in the photo above and below) is something I try to view with clearer eyes and a more logical mind:


The market is older, more tired, and more dangerous than the glossy photo shoots on CNBC might make you believe.

I continue to be fascinating by the NZD/USD trade. I don't think I've ever seen a market bounce off Fib retracements this predictably. It is incredible! Continued weakness here can only be good for U.S. stock bears.


The behavior of the Dow recently has been fascinating. (1) shows the point where the market was bottoming out and beginning to get the confidence to turn back up. At (2) it completes a beautiful saucer pattern, and it accelerates to (3). The market begins softening, which causes short-term worry, but then it regains its strength and zooms to (4). Now the bulls are starting to feel really good. But the drop from point (4) to point (5) is what this market is all about.......dashed hopes.......and, to me, is a strong sign that we may be headed for more marvelous weakness.


Here's a short term chart of my favorite index short, the Russell 2000. I don't know why the bid/ask spreads on this, a much more thinly traded option, are so much more reasonable than the gigantic S&P options, whose bid/ask is a complete rip-off. In any case, the horizontal line at 782 is my stop loss point.


A longer term view of the same index reveals the many Fib retracements I've laid down.


Now for a few short picks. Bank of America (BAC) seems to have exhausted its recovery.


Continental Airlines (CAL) is right at the cusp of a full blown breakdown.


I am madly in love with my CME puts right now. This stock looks so juicy you can just about cut it with a steak knife.


I haven't touched Google (GOOG) in ages, but I picked up some puts today.


MWP looks like a good short play on a hyperbolic stock.


And Reynolds (RAI) is a very clear toppy pattern.


I read the big economic news isn't until Friday morning. In spite of that, both Thursday and Friday are bound to be fascinating! See you again soon.........

Exodus 8:2

Things fall down.
People look up.
And when it rains, it pours.

First off, since my blog is suddenly so popular, a public service announcement: buy my book! Honestly, if you like charts, you'll love my book. And if you use the Investor Toolbox, you have got to get it - - it's the only way to become a ProphetCharts expert! Anyway......

Wow, no comments on how obnoxious yesterday's post was! I guess people have come to expect it. But that video was a kick, eh?

I woke up this morning - just like Tuesday morning - to a beautiful site. The GLOBEX totally smashed in by bearish action in China:


It was thrilling for a little while. The Dow plunged another 200 points. I watched my index puts (which I had stupidly sold Tuesday morning) move from $211,000 in "coulda" profit to almost $300,000. Ouch. Always nasty to see what could have been. The indexes were on a wild ride all day, at times even moving into positive territory. In the end, things were generally down a little.


I hate to say it, but I think it's more likely Friday is up than down. There are a couple of reasons. First, today's action was largely a freak-out session based on Tuesday jitters. Second, there are candlesticks all over the place - some of them gigantic. And third, people are talking bear talk now - - - it's best to maul bulls when they are not looking. That isn't the case now. The $VIX has exploded higher. (N00B alert: click on any chart to see a big version.)


A longer term look at the S&P shows how it could easily move back up to the underbelly of that broken trendline. At that point, it would be like shooting fish (or bulls) in a barrel. As it is now, I'm nervous.


It remains to be seen, but if we do sell off tomorrow, the Russell will have already accomplished its mission of pulling back to its own trendline. This is the only index on which I own puts right now. Puts are relatively expensive now, versus last week, because premiums have understandably exploded higher. So I'm afraid buying puts now is much riskier than just a week ago.


Just look at the candlestick on today's $TRAN action (wow, that sounds like something that would happen on a Castro street corner).


If we rally, the $XMI should do well. Look at not only the candlestick but also how nicely the prices have pulled back down to that former major breakout point (the horizontal line).


I bought some more CME puts today. It seems to me it has pulled back to resistance. I'd put a stop of $552 on these.


Here's a longer-term look at the same stock.


PICO, which I only just stumbled across today, has the makings of a good bullish pick.


I was really ticked this morning when I saw the NZD. I was short the currency. And it had plummeted overnight. So why I was upset, then? Because I had been stopped out on a margin requirement. See, this is something I hate about FX trading. It is so highly leveraged, it is very easy to get a margin call, and the broker will sell every single position you've got. So if you have a ten cent margin call, blammo, your entire account is closed out to cash. So I missed out on a huge move.


Just look at QID. Can you believe a security that started off with just over 100,000 shares traded in a day is now trading close to 20 million? What a success story!


RAI has formed a beautiful dome topping pattern.


And old favorite SHLD, my only bullish position, sported a nice candlestick today whose low met resistance. A stop on $172.49 is good for this one.


Friday should be really interesting, particularly since the weekend is upon us. If people are really shell-shocked and nervous, and they don't want to live through a weekend of uncertainty, maybe we'll get some downward pressure. But don't call me permabear if the market rallies tomorrow. I would say it's better than even odds on a good rally, in which case we'll have to sit things out until prices (and premiums) get reasonable again.