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Friday, May 05, 2006Strength Begets Strength
Ugh! OK, the bulls are completely in control of this market. Bulls everywhere - be they oil bulls, precious metal bulls, stock market bulls - have the world by the horns. We bears better hide in our caves and peek out until the weather is better for us. This is nasty!
The Dow is just a couple of hundred points away from its lifetime high, set in January 2000. The green stripe here illustrates how close the lifetime high is. It's hard to believe in 2002 we were 3000 points lower than this.
http://photos1.blogger.com/blogger/4311/970/400/0505-dia.jpg
The S&P 500 has smooth sailing, from the Fibonacci perspective. As the shaded area illustrates, there's about 4.5% left of "open air" until the next Fib is hit. This index has shown amazing power and resilience.
http://photos1.blogger.com/blogger/4311/970/400/0505-spx1385.jpg
If you need any evidence that the stock market is once again very visible in the public eye, look no farther than the home page of CNN.....
One other very bullish signal is that the American Major Markets index ($XMI) finally broke above its inverted head and shoulders pattern.
http://photos1.blogger.com/blogger/4311/970/400/0505-xmi.jpg
My difficulty with this market is that there simply aren't any bullish chart patterns that I like. There are certain stocks which seem to keep pushing ever higher (take a look at HANS, for instance). But I just can't get comfortable diving into something which is already up hundreds, or even thousands of percent.
This market puzzles me. But one thing is sure: the bulls are in charge, and, rational or not, the market just keeps soaring.
at 5/05/2006 10 insightful comments
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Thursday, May 04, 2006A Great Day! (for the bulls......)
Will wonders never cease? Take a look at the Dow Transports ($TRAN). Up well over 3%, fueled in large part by EXPD, which itself was up nearly 20%. And the Dow Jones Composite had a.......
http://photos1.blogger.com/blogger/4311/970/400/0504-Composite.jpg
Ugh! I guess this bull isn't so wimpy after all!
A strong retail report sent stocks solidly higher. And the ever-strong sectors stayed strong - - oil.....gold.......copper.
I was taking a look at some long term (multi-decade) charts of gold and silver. They are worth a glance. Take a look at the Fibonacci levels, and notice how both markets are coming right up against resistance. Worth noting, since these metals have been on a trip straight to the moon for quite a while. Here's gold......
http://photos1.blogger.com/blogger/4311/970/400/0504-gold.jpg
....and silver......
http://photos1.blogger.com/blogger/4311/970/400/0504-silver.jpg
at 5/04/2006 5 insightful comments
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Wednesday, May 03, 2006Topping Out Retrospective
There are a lot of very toppy patterns in the market. I thought it would be helpful to show some from the past as well to indicate what sometimes happens with these rounded tops.
http://photos1.blogger.com/blogger/4311/970/400/0503-ford.jpg
One pattern topping out right now is trendy clothes seller Urban Outfitters. I don't tend to like stocks less than $50, simply because the puts don't have quite as much juice in them. But for a straight short sale, this is worth checking out (symbol is URBN).
http://photos1.blogger.com/blogger/4311/970/400/0503-urbn.jpg
On a number of occasions I pointed to Express Scripts (ESRX) as a good short idea. It hasn't fallen as far as the shaded green target yet, but it's well on its way.
http://photos1.blogger.com/blogger/4311/970/400/0503-esrx.jpg
Insurance companies have been doing extremely poorly (I have not read the news to find out why). Aetna (AET) for instance got clobbered. Cigna (CI) is also taking it on the chin. I wouldn't short at these levels, but these charts are amazing.
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Insurance companies have been doing extremely poorly (I have not read the news to find out why). Aetna (AET) for instance got clobbered. Cigna (CI) is also taking it on the chin. I wouldn't short at these levels, but these charts are amazing.
http://photos1.blogger.com/blogger/4311/970/400/0503-ci.jpg
http://tradertim.blogspot.com/2006/04/couple-of-new-short-ideas.html]Early last month, I suggested selling Health.net short. This is also turning out fantastic. Just look at it slice through those retracement levels!
http://photos1.blogger.com/blogger/4311/970/400/0503-hnt.jpg
Finally, a quick glance at our old buddy Google (GOOG). I'm offering this chart to illustrate once again how the price is clinging to those Fib levels. Even with the big rally a couple of weeks back, the Fib retracement acted like a magnet, and the price is hugging it tight once more.
http://photos1.blogger.com/blogger/4311/970/400/0503-goog.jpg
at 5/03/2006 7 insightful comments
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Insurance companies have been doing extremely
http://photos1.blogger.com/blogger/4311/970/400/0503-ci.jpg
http://photos1.blogger.com/blogger/4311/970/400/0503-hnt.jpg
http://photos1.blogger.com/blogger/4311/970/400/0503-goog.jpg
at 5/03/2006 7 insightful comments
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Tuesday, May 02, 2006Crude and Gold Soar Again
Once again, gold and crude oil went straight up. These markets are just amazing. I don't tend to focus on commodities in this blog, but looking at the lifetime history of gold, crude oil, and copper, I am just blown away by these charts. There are fortunes being made (and lost, on the short side) out there. This is the equivalent of the Internet Bubble in the world of copper.
The stock market remains frustrating for both bulls and bears (with the exception of those who are long oil stocks, who have been doing great for many months now). Below is the past several months of the $INDU shown on a minute-by-minute basis. As you can see, we're "due" for a downward movement, but it's been stuck the past several weeks, not really going anywhere.
http://photos1.blogger.com/blogger/4311/970/400/0502-indu.jpg
There are many reasons the market "should" go down, but the market isn't going to read this blog and suddenly obey! If you look at skyrocketing oil prices, tension in Iran, a falling dollar, and the recent report that Medicare and Social Security are going to fail even earlier than the prediction of just a year ago (Medicare is just 14 years away from bankruptcy, according to our government - - and I'm sure that'll get closer), one would think we'd be seeing prices in a tailspin. But not so.
Here, for instance, is the percentage chance of OIH (the oil service sector ETF) recently, up more than threefold:
http://photos1.blogger.com/blogger/4311/970/400/0502-oih.jpg
One stock in particular (which even I'm not fool enough to touch anymore) is Hansen Natural, HANS. I'm not sure what they're putting in these soda cans (crack perhaps?) but it must be addictive stuff, given these valuations. I've put this graph in arithmetic form to illustrate just how amazing the price rise has been. It's got to fall someday, but I don't go near this thing - - it's a monster!
http://photos1.blogger.com/blogger/4311/970/400/0502-hans.jpg
One recent recommendation that seems to be working out is Genentech. The head & shoulders pattern is complete, and it lost a couple of points today. This chart looks better than ever for a fall:
http://photos1.blogger.com/blogger/4311/970/400/0502-dna.jpg
Long-time reader PB commented in last night's posting, "what is the point in being bearish in this market if all it does is go up on seemingly bad news??? It'd be a lot less painful just to go long!"
I'm afraid you are correct.....it seems the least painful thing to have done over recent history is just to pile on to the markets that seem insane (gold, copper, oil) because they just get more insane. The trick, of course, is knowing when to get off. For myself, I just don't want to do it - - the risk seems far too high in these hyperbolic markets.
at 5/02/2006 10 insightful comments
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Monday, May 01, 2006The Wimpy Bull
Well, how's this for a contrarian indicator? The esteemed newspaper Barron's had this on their front cover:
http://photos1.blogger.com/blogger/4311/970/400/0501-barrons.jpg
Complacency is now complete in the public's mind! (I guess the grumpy bear in the lower right are readers of this blog!)
Anyway, for most of the day, the bulls were in charge, especially in the land of oil, commodities, and gold. Copper and gold have just gone bananas. Anyway, the Dow had a nice healthy 40 point gain for virtually the whole day, until big-eyed Maria B. mentioned Ben Bernanke felt the public had misinterpreted him as an interest rate dove.
The mere second-hand mention by a reporter of the chairman's finessing of his statement caused the market to unravel in a matter of minutes.
http://photos1.blogger.com/blogger/4311/970/400/0501-bernanke.jpg
Is this really the snorting bull that's going to push the Dow past 12,000? This is a weak-willed, lily-livered bull. Any little risk, and it runs for the hills. Added to which, oil and gold are so stratospheric, when those eventually decide to come back to earth, it's going to be another big negative pull on stocks.
I don't do much FOREX in this blog, but I wanted to mention that EUR/USD looks like a good short. I'd put a stop in at $1.2931 on this one.
http://photos1.blogger.com/blogger/4311/970/400/0501-12931.jpg
at 5/01/2006 10 insightful comments
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Friday, April 28, 2006Not With a Bang, But a Whimper
Microsoft was the big headline-grabber today, losing about 11% of its market cap, its worst loss since 2000. Back in April of 2000, a Microsoft bombshell started to blow the NASDAQ apart. No such luck today - the NASDAQ fell only about 1%.
Take a look at this graph, and note in particular today's drop (this doesn't even capture the magnitude of the drop, since I took the snapshot intraday, when the stock wasn't down as much):
http://photos1.blogger.com/blogger/4311/970/400/0428-mstr.0.jpg
What's interesting here is - - once again! - - the trendline. Notice how it "jumped" to the other side, just like a dog jumping over a fence. So now this trendline has magically changed from support to resistance. It's particularly interesting since today's high exactly touches the underbelly of the trendline.
This "pooping out" of stocks is what I'm seeing more and more of. You can look at LEH, GS, CME - - all kinds of examples. So it's not like suddenly the market is crashing. But individual stocks are engaged in quiet trend shifts (as discussed yesterday) from broadly up to broadly down.
It all starts with one good down day. Here is Cummins (CMI) today as a fine example:
http://photos1.blogger.com/blogger/4311/970/400/0428-cmi.0.jpg
This kind of shift is very subtle, but from my observations, once a stock has had a "mini crash" like this, it creates a very different attitude toward the stock from the investing public, and you will often see it begin steadily eroding instead of building - so "higher highs, higher lows" changes into "lower highs, lower lows."
See you on Monday!
at 4/28/2006 3 insightful comments
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Thursday, April 27, 2006How Trends End
There is so much to talk about today!
The epic battle between bulls and bears continues. The daily gyrations are getting crazier (I am writing this intraday, and this snapshot was taken earlier):
http://photos1.blogger.com/blogger/4311/970/400/0427-battle.jpg
After the China currency news sent the markets down over 50 points, Bernanke's words pushed the market the opposite direction to be up over 50. And it's been bouncing ever since (although, with just 45 minutes left in the market day as I'm typing this, it looks like another up day.......so brace yourself for more "six year high" nonsense). Here is the Utilities sector, indicating the interest rate madness from Ben's mutterings......
http://photos1.blogger.com/blogger/4311/970/400/0427-util.jpg
So how do you like that ESRX pick of mine? I've mentioned it a bunch. It was down over 10% today last I checked, which means plenty of the put options are up 200% or 300%. Not bad, eh? I should start charging for this. ;-)
http://photos1.blogger.com/blogger/4311/970/400/0427-esrx.jpg
Another suggestion that's worked out great is Health.The performance of the fibonacci retracement on this is incredible! Just absolutely amazing. I've circled it to make it more obvious. And the moment it touched the latest retracement, boing, it started inching up.
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absolutely amazing. I've circled it to make it more obvious. And the moment it touched the latest retracement, boing, it started inching up.
http://photos1.blogger.com/blogger/4311/970/400/0427-hnt.0.jpg
The subject of today's entry is "How Trends End." In the broadest sense, what I've been anticipating (wishing/waiting/hoping, call it what you will) for is a general reversal of the market from uptrend to downtrend. Generally speaking, from 1991 through 1999 the market was in an uptrend. From 2000 through 2002 the market was in a downtrend. From 2003 through 2005 the market was up again. For 2006 so far, it's been a bit of a mixed bag, but generally speaking it's been more up than down. But the shift we want to see is a macro one.
As a single stock example, here's Yahoo - there's a very broad uptrend, which ended in early 2000, and it went into a very broad downtrend......
http://photos1.blogger.com/blogger/4311/970/400/0427-yhoo.0.jpg
What I'm seeing in chart after chart after chart is a "pooping out" of uptrends. In a nutshell, the market simply doesn't have the power to push these stocks any higher. The pattern of higher highs and higher lows ends when it can't make another higher high.......and if the prices take out the most recent "higher low" than there's a good chance the broad trend has changed. This begins with a chart that looks like the one below (which is a current chart of oil service provider AHC):
http://photos1.blogger.com/blogger/4311/970/400/0427-ahc.jpg
Notice how the breakout from the dish pattern simply never materialized. Anyway, I am feeling terrific about the market right now. There's so much interesting stuff happening. Good luck to you all, and thanks for reading what I've got to say.
at 4/27/2006 10 insightful comments
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