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Wednesday, June 07, 2006Love It
Let's not get too relaxed, however. Our friends the bulls are trying each day to turn things around. The NASDAQ Composite, shown below on an intraday basis (click it for a larger graph) illustrates it's having trouble getting below about 2,150. It needs to decisively crack this level to add to the bearish cash pile.
http://photos1.blogger.com/blogger/4311/970/400/0607-compq.0.jpg
The Dow 30 likewise has a triple bottom (although it's over such a small amount of time, it's not a very meaningful one). We're below 11,000 now, which is psychologically significant.
http://photos1.blogger.com/blogger/4311/970/400/0607-indu.jpg
Looking at the Dow 30, this time on a daily basis, it seems we've got a nice, clean path to 10,500. I base this on both head & shoulder measurements as well as the location of the Fibonacci retracements. We are plainly below the major ascending trendline that's been in place over three years now. Life is finally getting sweet.
http://photos1.blogger.com/blogger/4311/970/400/0607-indudaily.jpg
There is a major Fibonacci level at about 1,250 on the S&P 500. If we crack through 1,245 (which should be easy) it's going to be very smooth sailing for the bears.
http://photos1.blogger.com/blogger/4311/970/400/0607-spx.jpg
The one and only index I pointed out last month as risky for the bears was the American Stock Exchange's Major Market Index ($XMI). It had been forming an inverted head & shoulders pattern. This index has done us the kindest of deeds: the formation has failed, and a (smaller) bearish head & shoulders has formed. For a major bullish pattern to fail in its formation is excellent, excellent news. Thanks, $XMI!
http://photos1.blogger.com/blogger/4311/970/400/0607-xmidaily.jpg
I don't really have any specific stocks to talk about, simply because there are too many. I am delighted with my dozens of positions (all of them puts), which are shown in their entirety here:
at 6/07/2006 3 insightful comments
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Tuesday, June 06, 2006Decision Time
Another down day on the market, which is fine and dandy, but at this point I think one of two things is going to happen: (a) we're going to get another multi-day push upward in the market or (b) we're going to see another meaningful down day Wednesday (meaningful being greater than 100 points) at which point we'll all realize we're not in Kansas anymore.
As much as I'd love to see some new lows created, I'm thinking (a) is probably more likely. More on that in a moment. A quick look at yesterday's short recommendations shows 3 of the 4 with handsome drops, and the 1 that went up was up quite modestly. Overall, the four suggestions got zapped nicely (in just one day, no less).
ANDE down 5.43%
COF up .83%
MTH down 2.55%
TOA down 7.89%
The NASDAQ Composite, on a daily chart, looks like it's easing up on its desire to fall hard.
http://photos1.blogger.com/blogger/4311/970/400/0606-compqdaily.jpg
The same chart for the past several weeks on a minute-by-minute basis clearly shows the double bottom (indeed, the most recent bottom today was higher than the earlier one, which is, sadly, bullish).
http://photos1.blogger.com/blogger/4311/970/400/0606-compq.jpg
The Dow Industrials has hit two areas of support. One of them is a large trendline extending back to October (which is actually pierced today, but it closed above it). And second is a Fibonacci retracement level. The head and shoulders is complete, but it's a pretty scrawny one.
http://photos1.blogger.com/blogger/4311/970/400/0606-indudaily.jpg
As with the NASDAQ, the intraday seems to suggest a short-term double bottom.
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As with the NASDAQ, the intraday seems to suggest a short-term double bottom.
http://photos1.blogger.com/blogger/4311/970/400/0606-indu.jpg
One clue the S&P 500 daily chart (using a candlestick format) gives us is the spinning top. As you can see, the spinning top that took place a couple of weeks ago preceded a recovery rally. I've got a feeling we may see a replay of that here with today's similar spinning top.
http://photos1.blogger.com/blogger/4311/970/400/0606-spxdaily.jpg
At the risk of being a broken record, we see on an intraday basis a substantial double bottom forming here.
http://photos1.blogger.com/blogger/4311/970/400/0606-xmi.jpg
If we get another push up, I think that's just going to add to everyone's frustration. Bulls are sick of the carpet being yanked out from under them, and bears are sick of not being able to get serious about a steady, persistent bear market. If the market does get walloped Wednesday (improbable, but possible) we bears can focus a lot more about profiting from long-term disintegration instead of this hurky jerky nonsense.
at 6/06/2006 7 insightful comments
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Monday, June 05, 2006Another Bounce.....or Get Serious?
First, I apologize for the late posting. It's well past midnight here in California, and a combination of a busy day and Blogger's uploading capability being down for two hours contributed to burning the midnight oil.
The 200 point drop on the Dow Monday put a spring in my step. The market's behavior aligns nicely with what I'm been predicting. There's one particular daily market letter which, each day, puts in some bearish text and some bullish text and, the next day, puts in whatever was appropriate (after the fact) at the top of the new posting to make it seem like they were right on the money. No such games here. I'm going to always take the chance to state my mind about the market's direction.
As much of a mega-bear as I am, I'm still not ready to start waving the Flag of Doom yet. There's a reasonable chance of a bounce tomorrow (which would be a real drag, since these stupid bull bounces get really boring and tiresome; and they seem like a waste of time to me, since it seems we should get to the real business of a market wipe-out instead of all this pussyfooting around). The $VIX is shown below on an intraday basis. As the red line indicates, we bumped up against resistance today. The VIX really needs to cut through this line before it can move appreciably higher.
http://photos1.blogger.com/blogger/4311/970/400/0605-vix.jpg
But the action over the past couple of weeks has been superb. Look at the NASDAQ Composite below. A break, a retracement, and then a fall again. Beautiful.
http://photos1.blogger.com/blogger/4311/970/400/0605-compq.jpg
Here's a closer look at the NASDAQ so you can see in greater detail the textbook performance (the newbies out there: you can always click any of these images to see a bigger version).
http://photos1.blogger.com/blogger/4311/970/400/0605-compqcloseup.jpg
The Dow 30 is right on the cusp of completing its head and shoulders pattern. It's not the most massive H&S I've ever seen, but it fits the definition. If it breaks the neckline, we could see this heading to the green area I've shaded. As it is, I'm thinking it'll at least push down toward the circled red area, which is roughly where the supporting trendline would hit the price action.
http://photos1.blogger.com/blogger/4311/970/400/0605-indu.jpg
The Russell 2000 likely has an easy target on its supporting trendline. As I've pointed out before, notice how the most recent pattern was a rounded top (bearish) as opposed to the three saucers before (bullish).
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The Russell 2000 likely has an easy target on its supporting trendline. As I've pointed out before, notice how the most recent pattern was a rounded top (bearish) as opposed to the three saucers before (bullish).
http://photos1.blogger.com/blogger/4311/970/400/0605-rut.jpg
The S&P 500 likewise has a very technically-correct pattern.
http://photos1.blogger.com/blogger/4311/970/400/0605-spx.jpg
Let's look at a few specific recommendations. I like ANDE, although it is, unfortunately, not optionable:
http://photos1.blogger.com/blogger/4311/970/400/0605-ande.jpg
Capital One (COF) is getting close to completing its H&S, which would send it down to the green area I've shaded.
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Capital One (COF) is getting close to completing its H&S, which would send it down to the green area I've shaded.
http://photos1.blogger.com/blogger/4311/970/400/0605-cof.jpg
Oh, and remember my recommendation to shortLooks like this is finally starting to work out.
http://photos1.blogger.com/blogger/4311/970/400/0605-mth.jpg
Finally, symbol TOA has completely its H&S and broken nicely to the downside. I'd wait for a retracement back to the neckline for a nice, clean trade.
http://photos1.blogger.com/blogger/4311/970/400/0605-toa.jpg
at 6/05/2006 7 insightful comments
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Friday, June 02, 2006Are We Done?
Today marked what I hope was the high-water mark for the recovery. A number of charts speak favorably to this possibility. First off, the $VIX finished retracing its breakout and almost perfectly touched its former resistance level. It's actually pretty uncanny.
http://photos1.blogger.com/blogger/4311/970/400/0602-vix.jpg
The NASDAQ 100 opened higher but closed off its highs, and its high for the day retraced its recent fall back up to resistance.
http://photos1.blogger.com/blogger/4311/970/400/0602-ndx.jpg
Likewise, the S&P 100 ($OEX) retraced back to its Fibonacci line.
http://photos1.blogger.com/blogger/4311/970/400/0602-oex.jpg
The Russell 2000 is a favorite of mine right now. Its graph shows a rounded top, to which the price has retraced to resistance. Notice how this rounded top differs from the multiple saucer patterns earlier experienced within this broad ascending channel.
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The Russell 2000 is a favorite of mine right now. Its graph shows a rounded top, to which the price has retraced to resistance. Notice how this rounded top differs from the multiple saucer patterns earlier experienced within this broad ascending channel.
http://photos1.blogger.com/blogger/4311/970/400/0602-rut.0.jpg
A couple of specific stock short suggestions. Here's Burlington Northern, which hasn't finished its head & shoulders pattern, but it's worth tracking.
http://photos1.blogger.com/blogger/4311/970/400/0602-bni.jpg
Also there's old favorite Health Net, which had been terribly weak about a month ago and has recently been quite strong. It's getting back to a level that represents very good risk/reward. Pay close attention to the Fibonacci levels, illustrated here.
http://photos1.blogger.com/blogger/4311/970/400/0602-hnt.jpg
at 6/02/2006 6 insightful comments
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Thursday, June 01, 2006Watching for the Reversal
The strength in the market is exciting. Crazy to hear a bear say that? Nahhhh - this whole thing has been predictable. I'm delighted we had such a strong day today. I won't be delighted if we have a few more like it!
Looking at the $VIX, it seems that the fear has swiftly become wrung out of the market as things have shored up nicely for our friends the bulls:
http://photos1.blogger.com/blogger/4311/970/400/0601-vix.jpg
Looking at the index charts, I see each and every one of them approaching clean retracement/pullback levels. Here's the NASDAQ Composite as it marches back to the underbelly of its broken trendline:
http://photos1.blogger.com/blogger/4311/970/400/0601-compq.jpg
The Dow 30 is in the process of making a handsome head & shoulders pattern. If you're a bear, you do not want to see it move higher than the area I've circled.
http://photos1.blogger.com/blogger/4311/970/400/0601-indu.jpg
The NASDAQ 100 has farther to go than most other indexes, perhaps because it's been especially weak. If this whole affair is simply a retracement, we may not see this index reach back to its former support level before resuming its fall.
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The NASDAQ 100 has farther to go than most other indexes, perhaps because it's been especially weak. If this whole affair is simply a retracement, we may not see this index reach back to its former support level before resuming its fall.
http://photos1.blogger.com/blogger/4311/970/400/0601-ndx.jpg
The S&P 500 is making its way up toward its median line within a very clean channel pattern:
http://photos1.blogger.com/blogger/4311/970/400/0601-spx.jpg
Finally, the Dow Transports also stands a good chance of making a head & shoulders pattern. Although it wouldn't take much strength for it to render this pattern invalid.
http://photos1.blogger.com/blogger/4311/970/400/0601-tran.jpg
Readership is this blog has been growing steadily each day, and I want to again express how humbled I am that it's become so popular. Thanks for taking the time!
at 6/01/2006 17 insightful comments
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