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Tuesday, May 16, 2006Some Ideas to Gnaw On
A pretty ho-hum day on the market today, but that's no big surprise. A look at the past few years of the S&P 500 indicates there's ample room on the downside still, even within the confines of the ascending wedge pattern. The Fibonacci retracement levels aren't really worth considering at this stage, since we're still in the uncertain zone.
http://photos1.blogger.com/blogger/4311/970/400/0516-spx.jpg
I've got a few short recommendations to consider. The first is CSX, which is a Transports component. This is sky-high and seems to have lost steam. This is optionable and, to my way of thinking, presents a very positive risk to reward ratio.
http://photos1.blogger.com/blogger/4311/970/400/0516-csx.jpg
As cruel as Hansen Natural has been to us poor bears, I can't resist suggesting it - - this one is just insane, folks. Bananas. Late 90s style "this time it's different" Internet mania. Tulip country. You get the idea. Put in a stop at $202. (And could someone please explain to me why there are no options on this one? Please?)
http://photos1.blogger.com/blogger/4311/970/400/0516-hans202.jpg
A tip of the paw to buddy Michael Kahn for suggesting Marvel Technology (MRVL) a few days ago in his own column. This looks like a beauty. It's also been clobbered the past couple of days.
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A tip of the paw to buddy Michael Kahn for suggesting Marvel Technology (MRVL) a few days ago in his own column. This looks like a beauty. It's also been clobbered the past couple of days.
http://photos1.blogger.com/blogger/4311/970/400/0516-mrvl.jpg
Union Pacific (UNP) looks awfully toppy too. This one to me seems a slam-dunk.
http://photos1.blogger.com/blogger/4311/970/400/0516-unp.jpg
Lastly, in the same spirit as my Time Warner question last week - - - could someone tell me who trades Sun? And why? This has been about a $4.50 stock for years, and trades ten million shares a day. Someone responded to my TWX question by suggesting it was for capital preservation. Excuse me? I can introduce you to some good certificates of deposit that are safe and throw off similar gains (better, actually). So what's the deal?
http://photos1.blogger.com/blogger/4311/970/400/0516-sunw.jpg
at 5/16/2006 8 insightful comments
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Monday, May 15, 2006Waiting for History to Repeat Itself
Today was pretty much exactly the kind of day I expected after two big down days on Thursday and Friday: that is, an initial descent, some gnashing of teeth while the market tried to figure out what to do with itself, and then finally an ascent on the part of the Dow 30. The major financial sites predictably responded with the swift "recovery" of the market.
The kind of market I think we're in now is reminiscent of the one shown below - from 1966 to 1982. During that very long period, there was a fixation on "Dow 1,000". As you can see, the market hit that point again and again, only to fall from it each time. These days, the fixation is more oriented toward making a new lifetime high on the Dow. We got extremely close on May 10, but I suspect we're in the throes of what could be another major selloff. Whether or not the Dow has enough gas in it to cross the finish line or not remains to be seen. But compare this graph:
http://photos1.blogger.com/blogger/4311/970/400/0515-70sdow.jpg
......with the more recent Dow. As you can see, the possibility that we're in the first few years of an incredibly length range-bound market is clear.
http://photos1.blogger.com/blogger/4311/970/400/0515-recentdow.jpg
The NASDAQ 100, which has been quite weak lately, fell through an important support level today. Once the markets do resume their weakness, I imagine the NDX will be especially weak. This support level was quite important, and now it's gone.
http://photos1.blogger.com/blogger/4311/970/400/0515-ndx.jpg
Part of the reason for the market's weakness today was that recent hyperbolic markets (Gold, Silver, Crude Oil, Copper, etc.) got blasted. What's great about being a bear in any market is that drops in price usually come much faster than rises. Take a look at this chart - it took just over a couple of days to erase the gains which took weeks to establish in the first place.
http://photos1.blogger.com/blogger/4311/970/400/0515-goldgone.jpg
I think if you'll look back over last week's recommendations, you'll see virtually all winners. At this point, I've scaled back quite a bit, as I'd prefer to re-enter positions at better prices than these, particular in the energy markets. See you tomorrow, everyone!
at 5/15/2006 2 insightful comments
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Friday, May 12, 2006Thanks, Consumers!
Let's just take a look at a few indices today. Here's the Dow 30 in candlestick form for the past year or so. The past two days are pretty remarkable, and the next stop might be the trendline you see beneath. We are going to have to ultimately crack that line in order to make a more serious move down.
http://photos1.blogger.com/blogger/4311/970/400/0512-dow.jpg
More encouraging are the series of breakout failures (prepare yourself to see that pair of words a lot...........) in the other major indices. Here's the NASDAQ 100:
http://photos1.blogger.com/blogger/4311/970/400/0512-ndx.jpg
......the S&P 100:
http://photos1.blogger.com/blogger/4311/970/400/0512-oex.jpg
And the American Major Markets Index. I noted this one a few days ago since it had broken out from a pretty nice inverted head & shoulders. Well, bulls, the pattern's been invalidated. Prices have crossed back underneath the neckline in a big way, so there is no longer a breakout.
http://photos1.blogger.com/blogger/4311/970/400/0512-xmi.jpg
For you voyeurs out there, here are my current positions. Those listed twice are those in which I actually have two positions (meaning I'm especially confident). All of these are puts.
at 5/12/2006 17 insightful comments
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Thursday, May 11, 2006Blowing the Froth Off
Yesterday I wrote, "Below is the Dow 30. I could make all kinds of technical jargon, but I will offer only this: the market is really, really, really extended. It will not keep going up every day, people. Promise."
Well, promise kept. All the indices got beat up. The NASDAQ 100 was down 2.2%. The Dow was down 142 points. I have embraced a sober view of my bearishness, however. As the chart shows below, there are plenty of times the market has pushed up against its resistance trendline, only to ultimately push higher.
http://photos1.blogger.com/blogger/4311/970/400/0511-spx.jpg
So I'm not going to be beating any "the market is crashing!" drum. It's down today, and that's great. And I hope it goes down a lot more. But there is no sea change in the market's direction yet. It could consolidate and push inexplicably higher yet again.
The oil sector threw me for a bit of a loop this morning. I got instantly stopped out of my OIH position at the open this morning (it gapped up) only to see OIH fall the rest of the day. Crude oil might have topped out, but it's very hard to say. A day like today would definitely give pause to the energy bulls.
http://photos1.blogger.com/blogger/4311/970/400/0511-oih.jpg
The NASDAQ is clearly the weakest index in the U.S. these days, and the $NDX has finally snapped below its supporting trendline. This is great news for the bears. As you can see, this trendline goes a way back, so this is a pretty good signal of a change for the better.
http://photos1.blogger.com/blogger/4311/970/400/0511-ndx.jpg
Take a look at stock CHRW as a short candidate with a stop of $50.25. I like how it's retraced part of its recent fall and seems to be re-weakening.
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Take a look at stock CHRW as a short candidate with a stop of $50.25. I like how it's retraced part of its recent fall and seems to be re-weakening.
http://photos1.blogger.com/blogger/4311/970/400/0511-chrw.jpg
The same can be applied to E*Trade (ET). I usually don't buy puts on stocks this inexpensive, but the trend change seems so clear (and its ascent so mighty) that I made an exception here.
http://photos1.blogger.com/blogger/4311/970/400/0511-et.jpg
Not a recommendation per se, but one chart I wanted to offer as a great example of "lower highs and lower lowers" is AIG, which got whacked today. It also is very trendline-compliant. This is a really beautiful graph from a technician's perspective.
http://photos1.blogger.com/blogger/4311/970/400/0511-aig.jpg
One last, random comment. I'm just curious - can someone tell me who trades Time Warner? And why? This has got to be the most boring chart in the world, yet it trade millions of shares a day. Do you get a free sandwich or something if you place a trade on TWX? I'm just wondering, because the nearly-flat graph below represents about three years of activity.
http://photos1.blogger.com/blogger/4311/970/400/0511-twx.jpg
at 5/11/2006 6 insightful comments
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Wednesday, May 10, 2006Extending the Overextension
The insanity surrounding "Fed day" has become so predictable it's perversely boring. It's the same old song - - from the open until 2:15 EST, the market doesn't do much of anything special. Then a snare drum rolls, the announcement is read, and the markets go stark raving mad for about 30 minutes. It's quite a spectacle.
http://photos1.blogger.com/blogger/4311/970/400/0510-fedlunacy.jpg
Speaking of lunacy, here's an updated chart of perpetual riser Hansen Natural (HANS). This is a percentage chart. I don't touch this thing. I just watch in amazement. It's kind of hard to fathom that a niche player of energy drinks has a market capitalization approaching five billion dollars. This stock will fall hard one day, but I for one am not about to guess when or why!
http://photos1.blogger.com/blogger/4311/970/400/0510-hans.jpg
As long as we're looking at insane charts, let's drink in the latest on copper:
http://photos1.blogger.com/blogger/4311/970/400/0510-copper.jpg
......and gold:
http://photos1.blogger.com/blogger/4311/970/400/0510-gold.jpg
Just to show you how loony things have become........I was speaking with my electrician about providing an electrical circuit to my back yard for some construction work going on. The electrical contractor emphasized that the bid was only good for one day, since the price of the wire was moving higher so rapidly, he could not rely on his own cost of materials. When your own electrician has to worry about commodity prices for a 100 foot piece of cable, you know things are bananas!
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Below is the Dow 30. I could make all kinds of technical jargon, but I will offer only this: the market is really, really, really extended. It will not keep going up every day, people. Promise.
http://photos1.blogger.com/blogger/4311/970/400/0510-indu.jpg
The NASDAQ 100 fell over 1% today, and as you can see from this chart, its attempt to bust out above its consolidation simply isn't going to happen. If it weakens further, it is at serious risk of cutting beneath a major supporting trendline.
http://photos1.blogger.com/blogger/4311/970/400/0510-ndx.jpg
at 5/10/2006 9 insightful comments
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Tuesday, May 09, 2006A Couple of Buys While We Wait......
Really not much going on in the market to talk about. Yes, the Dow was up again, but it seems to be kind of acting on its own. Even though it moved up more than 50 points, the S&P 500 did nothing and the NASDAQ fell. So it seems the Dow is standing alone as the truly strong, consistent mover.
Looking back, on Express Scripts (ESRX) was when the stock was at about $92. It has since fallen to about $70. The green shaded area, which I drew a long time ago, seems to have been achieved. That doesn't mean it won't go farther, but I'm proud to point out that the original price target was cleanly reached today.
http://photos1.blogger.com/blogger/4311/970/400/0509-eres.jpg
One of the very few bullish looking patterns I see out there is Cirrus Logic (CRUS).
http://photos1.blogger.com/blogger/4311/970/400/0509-crus.jpg
Another is Chipmos Technologies IMOS (IMOS), which is likewise in the semiconductor industry.
http://photos1.blogger.com/blogger/4311/970/400/0509-imos.jpg
Hopefully tomorrow's Fed announcement will shake off some of this uncertainty. See you afterwards!
at 5/09/2006 7 insightful comments
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Monday, May 08, 2006The Waiting Game
OK, I've got a confession. All that stuff about the bulls being in control and the bears needing to hide in a cave? Deep down, I don't really believe it. I think the market has been living on borrowed time, and it's all going to blow up at some point. It's waiting for that "some point" which is exasperating.
The first is Allegheny Technologies (ATI), shown below. I've mentioned this one more than once, but it's an intriguing chart. It's clearly below its ascending trendline, and the ascent over the past few months has been so massive (with diminishing volume) I'd say this was a pretty good short, with a stop price at $80.
http://photos1.blogger.com/blogger/4311/970/400/0508-ati.jpg
A similar short suggestion, with similar rationale, is Carpenter Tech (CRS) with a stop at $140.
http://photos1.blogger.com/blogger/4311/970/400/0508-crs.jpg
The "very bullish" chart of the American Major Market Index ($XMI) should be taken in context, by the way. If you look at the chart of the past several years, including the highlighted inverted head & shoulders, you can see that it's nothing to write home about. Even if it manages to hit its full inverted head & shoulders target, it's not going to get to any new lifetime high.
http://photos1.blogger.com/blogger/4311/970/400/0508-xmi.jpg
Lastly, take a look at the (recently very boring) GOOG. Its nearest Fibonacci retracement level is $394.58 by my calculations. Just look at this intraday chart over the past week or so - it is just amazing to me how the price is clinging - closer and closer, in fact - to the Fib level. Spooky!
http://photos1.blogger.com/blogger/4311/970/400/0508-goog39458.jpg
at 5/08/2006 7 insightful comments
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