Spock Grok

I was going to write a huge entry today about emotions and the market. But it's already four hours after the close, and I'm still stung with guilt pangs from such a late posting last night, so I'm going to leave my essay for another day.

I will say, though, that I yearn to be like Spock during times like this. The problem with these range-bound markets is that, for a bear, (a) when at the low end of the range, I'm flush with profits, I'm totally committed to my positions, and I'm into way more risk than I should be since I've been doing so well; yet (b) when at the high end of the range, when I'm sacrificed some or all of those aforementioned profits, I'm skittish and risk-averse. Obviously being just the opposite would be helpful on both counts. Spock is a cool customer.


Of course, we're all only human, and markets run completely contrary to human nature. That's why there are a handful of big winners - - those that defy the greed/fear trap - - and the rest of us are just schlubs. Let's face it - emotions and the financial markets are just another example of one of life's bad combinations.


I haven't mentioned China in a while. I'll say this.........long term, I think China is going to be king of the world, or at least a prince. Whereas its neighbor Russia will, in my opinion, collapse back into socialism or communism within the next decade. My optimism for China's long-term prospect's aside, what we're witnessing now is a bubble, pure and simple, driven largely by embarrassing naievete on a greedy yet clueless investing public.


The Dow fell 148 points today. It doesn't mean much until and unless we break 13,250. If we do, I'll probably return to being the arrogant pr*ck you all love so dearly. Until then, my hands remain peacefully clasped on my lap.


The Russell 2000 had an even worse (that is, better) day. My index puts on the $RUT did great.


The S&P is approaching the re-entry point on that channel is busted above a number of weeks ago.


I've stopped buying puts on AutoZone - there's only so much punishment I enjoy - but this stock is really looking toppy.


Ol' beanie has mentioned BIDU so much I might as well put up a chart. My hat is off to any chart that can do this on a day like today.


I added to my Capital One Financial (COF) position.


The DIA puts aren't as clean a deal as the IWM or RUT puts, but they're OK - - decent volume and a 10 cent not-too-terrible bid/ask spread. I did a day trade on these today with good results.


Goldman Sachs (GS) continues to be a put position I believe in.....although the big plunge never seems to happen to AJC's employer.


I've mentioned McKesson (MCK) many times because of its Fibonacci fans. Add to this now an imminent head and shoulders breakdown.


Someone mentioned SHLD in the comments section today.......thanks very much! I've mentioned Sears over and over. It's been inching down. Only today did it really take it in the groin.


VMC is kind of an interesting pattern, inasmuch as it seems to be breaking below a pretty wide consolidation rectangle.


I heard this tune today, and it reminded me of the markets.......to everything there is a season. Bears: I swear it's not too late.

The Show Must Go On

It was another relatively uninspiring day on the markets......but I dare not let a post go stale! So, as always, at least a few thoughts.

Akamai (AKAM) is a peculiarly slanted head and shoulders pattern which inched lower today, in spite of some general market strength.


Albemarle (ALB).....and, good technician that I am, I have no clue what they do.... continues to fall nicely. There is really very little in the way of support on this stock, so I'll just keep tightening up my stocks.


Just to show again I am not a bear a bear only, I've got a couple of bullish ideas. One of them is Blockbuster (BBI) which is trying......apparently with some success....to change their business model in the age of Netflix and Apple TV.


Another bullish idea - well, kinda - is DXD, which is a double inverse ETF based on the Dow 30. It's incredible how popular these things have become. Just look at that volume.


A bullish idea I've mentioned before which is moving in the right direction is JetBlue (JBLU).


My crusty old short in Sears Holding (SHLD) is ever-so-slowly moving downward. It finally edged beneath the support line you see drawn here.


I'll see you here tomorrow.

...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........

The Less We Say About It, The Better

Two good days in a row. I won't get used to it. The crapola bull-filled last 11 months has left me bitter and disillusioned. But seeing a bunch of green over the past couple of days has been nice. I was prepared for all the pointless "Buy the dips!" and "Get in now to ride to Dow 15,000" nonsense in the comments section. It's what you can expect.

The S&P 500 over the past couple of years was in a giant, upward-sloping channel. The highlighted area is the "above even the top" chunk. The madness exceeding the madness. At a minimum, I would expect us to at least re-enter the aforementioned channel.


The $VIX, understandably, has shot higher, given the approximately 200 points blown off the Dow 30. Fear is on the rise. Finally.


AutoZone is one of those nice shorts which has a tight stop but plenty of potential downside. It's one of those charts that could represent a major trend-shift but doesn't make you pay through the nose to see if you are right or wrong.


Bunge (BG), mentioned here many times already, is on its way to its target price. This is a short position (obviously).


A thoughtful reader sent me a suggestion of symbol CEG. This is a handsome looking short. I have no position in it, but I'll follow it from now on.


Big Blue, good old IBM, really got smacked today. I've got puts on both IBM and Honeywell (HON), both of which pushed much higher on the day.


I am showing NVR again simply because it is such a "Fibonacci friendly" stock, to use a phrase I coined a while back. The way it bounces off these retracement lines is really a sight.


I've unsuccessfully owned puts on Sears Holding (SHLD) in the past, and it has never worked out. Once more into the breach, dear friends.


Since I'm feeling a little better, I'll keep throwing the goodies your way. Here's the marvelous Naive Melody from you-know-who.

Energy's Strength

It's true - the market (as measured by the Dow 30) was up for the 8th day in a row today. This hasn't happened since 2003. So the press is all over that.

Less touted is the fact that today, for instance, the Dow was up all of 4.71 points. In percentage terms, that's the equivalent of a person with a six-figure income rushing home to tell their spouse their gross salary is going up $37.45 per year. Whoo hoo!

One quick note on American Home Mortgage (AHM) before we get started in earnest..... the stock continues to tumble. The tough part - and this is always much tougher than picking out opening positions - is when to close it. I took a look at a long-term chart, and the next really meaty support level is literally in the $6.50 to $7.00 range. Does that mean the stock will go that low? I have no idea. But this short position looks even better today than it did yesterday.


As for the market in general.....same story from me. Take a look at the DIA graph below. The bulls just keep wrenching things higher, but we're still below that busted trendline. Looking at this one graph, it seems the bulls are losing steam. But we know how easily they can recharge those locomotives, don't we?


I've been impressed and surprised by the strength of energy stocks. I have a substantial investment in natural gas fields, so I'm happy to see NG prices creep higher. But my feeling a few days ago that oil stocks were topped out was off the mark.

What's tough about buying into hot stocks is that it's difficult to see them going higher. But they often do. Here's a great example....Entergy (ETR), shown below, had pushed into a new high of about $78. Not that many months before, this has been a stock trading in the high 20s. It's hard to get excited about getting into a stock that has risen hundreds of percent like this.


But look what happened after the breakout (shown with the same horizontal line). This sucker just kept climbing. I admit that I am lousy about getting into stocks pushing into new highs.....it just seems too risky. But the fact is that this is how fortunes are made. Technical breakouts on strong volume often indicate many more gains ahead.


But when thinking about energy stocks, it often helps to at least have a passing awareness of what the commodity itself is doing. The main one, crude oil, has a long-term chart shown below. Obviously oil has had an amazing push skyward since the late 90s, blasting off about 600%. I'll leave it to you to decide where you think oil might go next. I truly have no strong opinion.


Looking closer, it could be argued that there's a head and shoulders pattern in the recent history. Not a textbook-beautiful one, but a visible one nonetheless. That would suggest future weakness. But, again, I truly have no strong view on where energy prices might be going.


Having said that, here are a few energy-related stocks with impressive charts. Dril-Quip (DRQ):


Schlumberger (SLB):


And Questar (STR).


A couple of mentions that are not directly energy-related.....first, I got bounced out of Continental Airlines (CAL), but I'm still eyeballing it. I've inched the neckline up a bit to accommodate the price move. This is not as clean a pattern as it was, but it's still worth watching.


Lastly, Sears Holding (SHLD) continues to be amazing (for bulls). I've mentioned this beautiful cup with handle pattern before. I have no position in it now, but if I were long, I would be delighted. This is an amazing-looking chart.


That's it for today. Let's hope the market gets a little more interesting soon. Otherwise, we'll have a 9th up day in a row, and it'll be +0.35 on the Dow.