Holly (HOC), although a big winner over the past year for the bulls, is so lofty it represents a relatively low-risk short position, as dictated by the trendline you see. It seems to have peaked for now.
http://photos1.blogger.com/blogger/4311/970/400/0414-hoc.jpg
Finally, the utility ETF whose symbol is UTH is continuing to weaken, as I thought it would a couple of weeks back. The green highlight indicates my earlier prediction for how far it might fall.
http://photos1.blogger.com/blogger/4311/970/400/0414-uth.jpg
at 4/14/2006 6 insightful comments
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Tuesday, April 11, 2006Medium Term Trendline Broken!
OK, good. In spite of an earlier bounce off the supporting trendline, the Dow lost its footing and broke beneath it. The first step in the two-step process I outlined yesterday has taken place.
http://photos1.blogger.com/blogger/4311/970/400/0411-DowBreak.jpg
It's clear the market is losing steam. We're also exiting the strong November-April season and heading into the weaker May-October season. As earnings season approaches, the opportunity for the long-awaited downdraft may be upon us. The next psychological barrier is to break below 11,000. Next, it needs to break below the 10,922 low set on March 8th. That would bring an end to the series of higher highs and higher lows that has been in place since October 13 of last year.
at 4/11/2006 5 insightful comments
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Dow Trend Bounce
Just a quick intraday post - take a look at the first graph in yesterday's post, showing the two ascending trendlines the Dow has to break in order to turn bearish. The market's down right now, but look at how the Dow hit the higher trendline and immediately bounced.
http://photos1.blogger.com/blogger/4311/970/400/0411-trendbounce.jpg
As long as I've been doing this, I continue to be amazed. Anyway, you can see the market respects this line in the sand. It's got to break the line clearly to make the next move down.
at 4/11/2006 1 insightful comments
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Monday, April 10, 2006The Return of Johnny One-Note
Last week, I tried to buy the bullish argument. I really tried. I even made a few suggestions on stocks. But I just don't buy it. This market, it seems to me, is too weak to do what the bulls want it to do.
The post-bear market recovery that started in October 2002 and continues to this day have pushed some stocks hundreds - even thousands - of percent higher. But as I look at all the major averages and hundreds of different major stock charts, I cannot escape one simple conclusion: even if I wanted to buy, there's just really not much good "merchandise" out there. It's far easier to find stocks prone to fall than it is to find stocks prone to rise more.
Let's take a look at the latest charts of three major U.S. averages. First, the Dow Jones 30. In order to get truly bearish, it needs to break its short-term ascending trendline as well as its medium-term ascending trendline. This index has been inching up for the past six months, and it has the potential to keep doing so unless both of these trendlines are clearly broken.
http://photos1.blogger.com/blogger/4311/970/400/0410-INDU.jpg
Next is the NASDAQ 100, which has been weaker than the Dow over the same time period. This index has, over a three month period, formed a modest saucer pattern, but it's relatively wimpy and the prices simply aren't pushing strongly higher. If this pattern collapses, I think it might mark the turning point.
http://photos1.blogger.com/blogger/4311/970/400/0410-ndx.jpg
Lastly is the all-important S&P 500. The ascending trendline, representing resistance, is easy to see here, and recently it was pushing up against this trendline. Prior attempts to push past it have failed, and after last Friday's swoon, I think the hope for any big breakout is fading. Anything short of stellar Q1 earnings in the market could mean the end of what has to date been a fairly steady advance by the market over the past three and a half years.
http://photos1.blogger.com/blogger/4311/970/400/0410-spx.jpg
at 4/10/2006 3 insightful comments
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Monday, April 10, 2006Express Scripts and a Look Back
I suggested shorting Avalon Bay and Health Net. I'm pleased to see both of these stocks have fallen pretty much every day since then.
Another stock I've been watching a while is Express Scripts (ESRX) which broke its neckline today and seems like a pretty clean short sale.
http://photos1.blogger.com/blogger/4311/970/400/0410-esrx.jpg
Another high-flier which looks like it has double-topped is old favorite NutriSystem (NTRI).
http://photos1.blogger.com/blogger/4311/970/400/0410-ntri.jpg
My recent "bullish picks" absolutely stink. I think I'll stick with being a bear! There are just so many great shorts out there right now. If I get time, I'll review a few this afternoon.
at 4/10/2006 3 insightful comments
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Friday, April 07, 2006Rates Weigh Down the Market
Well, forget about this being bullish - even temporarily. The market is losing momentum, and all these hyperbolic charts are looking sick.
The interest rates are starting to weigh on the market. A number of weeks ago I pointed out that the Utilities were going to get smashed, and they have been. The head & shoulders pattern is crystal clear now.
The reversal today was extraordinary. Below is the Russell 2000. The open was a new lifetime high on this index, and the close was substantially below it. The portion rectangled in red is the "churning" that's been taking place above the former resistance trendline. It will need to smash below this decisively to clearly be bearish.
http://photos1.blogger.com/blogger/4311/970/400/0407-rut.jpg
We've had good luck with Autodesk a couple of times before, so let's try for a third. This is pushing up towards a medium-sized resistance line. I'd say short this and stop at any price above $44.
http://photos1.blogger.com/blogger/4311/970/400/0407-adsk.jpg
We've also been watching Genentech for a while, and it's finally broken its neckline. This is a pretty massive pattern, so it's fairly promising, especially considering the poor performance of biotechs over the past few months when the market as a whole has been pretty strong. I'd suggest shorting this one, stopping out at any price above $89.91.
http://photos1.blogger.com/blogger/4311/970/400/0407-dna.jpg
Have a good weekend, everyone!
at 4/07/2006 2 insightful comments
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Thursday, April 06, 2006Short Apple
I believe it's time to short Apple Computer (symbol AAPL). Close out any position if the price crosses above $73.
Below is a chart of Apple's entire trading history since their 1981 IPO (adjusted for splits, of course). I have highlighted in green five discrete "hyperbolic rallies", the most recent of which is the most dramatic and peaked last January 12th.
http://photos1.blogger.com/blogger/4311/970/400/0406-AAPLLongTerm.jpg
I'm not an Apple-basher, by the way. I bought my first Macintosh early in 1984, shortly after it was introduced. I worked at Apple for nearly three years in the late 1980s. And Steve Jobs has been my personal hero since I was a kid. So Apple is a great company with wonderful and well-polished products.
But their stock is atmospheric at this point. I would characterize the five tinted "hyper-rallies" as follows:
[*]1982-1983 - General high-tech rally; anticipation of Lisa & Macintosh[*]1986-1987 - Post-Jobs ouster recovery and popularity of Mac as desktop publishing tool[*]1990-1991 - Post-Kuwait tech rally and popularity of faster Macs, such as the IIfx (Multimedia)[*]1998-1999 - Jobs influence on product line improves earnings and reputation[*]2004-2005 - iPod rally, earnings momentumYou can clearly see what happened after each of these five hyper-rallies. The stock fell, and it fell hard and fast. The stock already started doing this over the past 10 weeks, although the past couple of days have pushed the stock up to a much safer level for bears. Here's the entire "iPod rally", where the stock went up more than ten-fold.
http://photos1.blogger.com/blogger/4311/970/400/0406-aaplipodrally.jpg
Taking a closer look at recent history, you can see the Fibonacci retracement closely aligns to the price behavior. Indeed, today the 50% retracement was nailed to the penny. I'd say this is a relatively safe high reward/low risk trade.
http://photos1.blogger.com/blogger/4311/970/400/0406-aapl-fib.jpg
at 4/06/2006 8 insightful comments
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Wednesday, April 05, 2006Bullish Charts for a Bullish Market
Maybe you think you're on the wrong blog, since I actually have some "buy" recommendations today. But if you can't beat 'em, join 'em, and I'm sick of fighting the upward tide.
The Dow Jones Composite hit a lifetime high today. It is currently 12% above its peak during the Internet bubble. The Dow Transports also hit a lifetime high today, and it is 23% above its bubble high. The Dow Industrials is still about 400 points below its lifetime high, and it needs to cross above 11,335 before that becomes a possibility.
One compelling chart for a bullish case is this one of the NASDAQ Composite. It sort of kind of has an inverted head & shoulders pattern. Not textbook, by any stretch, but it keeps pushing its way into relatively clean territory.
http://photos1.blogger.com/blogger/4311/970/400/0405-compq.jpg
The Gold market is one which seems clearly past its peak. The chart below shows nearly twenty years of data for the $XAU, and it seems to have hit a major top for the third time in a row (see circled prices).
http://photos1.blogger.com/blogger/4311/970/400/0405-xau.jpg
First recommendation is NWRE (stop price: 21.53; in all cases, the stop price cited means any price below this should generate a sell @ market order).
http://photos1.blogger.com/blogger/4311/970/400/0405-nwre.jpg
Second is Prudential Financial (PRU, stop price 74.52). I suggest waiting for a breakout to a new high before pursuing this one.
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Second is Prudential Financial (PRU, stop price 74.52). I suggest waiting for a breakout to a new high before pursuing this one.
http://photos1.blogger.com/blogger/4311/970/400/0405-pru.jpg
Radyne (symbol RADN stop 12.68) is next:
http://photos1.blogger.com/blogger/4311/970/400/0405-radn.jpg
SCMR (stop 4.46) has been struggling for years. It needs to clearly break above this saucer, but if it does, it could mean a major move.
http://photos1.blogger.com/blogger/4311/970/400/0405-scmr.jpg
Lastly is TradeStation (TRAD, stop 13.33) which not only has had great price action lately but also a sensational increase in volume. Always a powerful combination....
http://photos1.blogger.com/blogger/4311/970/400/0405-trad.0.jpg
at 4/05/2006 8 insightful comments
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Tuesday, April 04, 2006Going Nowhere Fast
Yes, I know the market was up some today. And it was up some yesterday. But the fact is that this market is stuck without any clear direction - either up or down - and it's maddening.
Here is a chart of a true trending market; this was back in 1995 and the first part of 1996. The market pushed higher, virtually uninterrupted:
http://photos1.blogger.com/blogger/4311/970/400/0404-INDU.jpg
Here, on the other hand, is the recent history (intraday) of the S&P 500. Up. Down. Up. Down. Churn, churn, churn. It's going nowhere fast.
http://photos1.blogger.com/blogger/4311/970/400/0404-SPX.jpg
Why is this? Well, one reason is that in spite of all the talk of "5 year highs", the market still has a fair bit of overhead resistance to conquer. Even the Dow, which is nearer to historic highs than any other major index, isn't out of the woods left. Notice the highlighted area representing overhead resistance, and it's no wonder earnest attempts to push higher get repelled.
http://photos1.blogger.com/blogger/4311/970/400/0404-InduOverhead.jpg
The market hasn't had any reason to move up or down in a meaningful way. Even though I'm a technician, I admit that earnings do drive share price, and there will be a lot more clarity in the coming weeks whether the market is going to shake off the doldrums and blast higher or if it'll succumb the the pressures of a tired bull market. In the meantime, feel free to share your own views and specific recommendations in the comments section.
at 4/04/2006 10 insightful comments
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Monday, April 03, 2006Rally Gets the Wind Taken Out
The market took off like a rocket this morning, with the Dow up over 130 points. But, as is so often the case lately, the market can't seem to make up its mind. Only about 30 of those Dow points survived to the end of the day, and some indices actually fell. The NASDAQ composite is a good example, exhibiting a bearish engulfing pattern for the day (the open is higher than Friday's close and the close is lower than Friday's open). I'm not sure how much longer the bulls can keep this up. Where else is the steam going to come from?
http://photos1.blogger.com/blogger/4311/970/400/0403-COMPQ.jpg
Hopefully as earnings season cranks up in a couple of weeks the market wil get some clarity as to its direction.
at 4/03/2006 6 insightful comments
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Monday, April 03, 2006Couple of New Short Ideas
The market is soaring this morning (Dow's up over 100 points). In the face of this, I offer a couple of relatively low-risk short ideas (note to the bulls out there: how about you offer some specific stock recommendations, including stop-loss prices, since you seem convinced of your stock-picking acumen?)
First is Avalon Bay (AVB), which is in the overheated REIT market. This is a hyperbolic stock which has a stop-loss price of 110.65.
http://photos1.blogger.com/blogger/4311/970/400/0403-avb.jpg
The second is Health Net (HNT), which I'd give a stop-loss of 51.03. It broke a major ascending trendline and has retraced to an important Fibonacci level. Again, this is a low-risk, high-reward trade since the stop-loss is so close.
http://photos1.blogger.com/blogger/4311/970/400/0403-HNT.jpg
at 4/03/2006 6 insightful comments
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