Thursday, March 30, 2006Topping Out Continues
I was delighted, of course, that my prediction the fall would resume today materialized. That validates that the prices were simply retracing to resistance. I'm anticipating further descent tomorrow.
Here's a few favorite shorts, including stop prices. Maybe I've mentioned a couple of these before. The stop price is, by the way, the price above which the position should be closed. As always, click on the image to see a much bigger chart.
ACI (stop: 78.60)
http://photos1.blogger.com/blogger/4311/970/400/0330-aci.jpg
ESRX (stop: 91.64)
http://photos1.blogger.com/blogger/4311/970/400/0330-esrx.jpg
FLR (stop: 88.50)
http://photos1.blogger.com/blogger/4311/970/400/0330-flr.jpg
HP (stop: 72.74)
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HP (stop: 72.74)
http://photos1.blogger.com/blogger/4311/970/400/0330-hp.jpg
MCK (stop: 53.11)
http://photos1.blogger.com/blogger/4311/970/400/0330-mck.jpg
UBB (stop: 86.64)
http://photos1.blogger.com/blogger/4311/970/400/0330-ubb.jpg
UTH (stop: 112.88)
http://photos1.blogger.com/blogger/4311/970/400/0330-uth.jpg
at 3/30/2006 10 insightful comments
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Wednesday, March 29, 2006Retracing Back to Resistance
Today's action seems to have elicited a lot of "Take THAT, bears!" from both the media and the readers of this blog.
Simply stated, I think today's retracement is to be taken in stride. Look at the graph below, which is a minute-by-minute graph of the $INDU for all of 2006. The upper trendline, briefly conquered, now represents resistance. Today was a retracement back up to that line, and I suspect tomorrow we'll start to see prices sinking again. Click on the graph for a much bigger view.
http://photos1.blogger.com/blogger/4311/970/400/0329-INDU.jpg
at 3/29/2006 10 insightful comments
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Fibber Island
Just a single quick suggestion (the meaty stuff is in last night's post - see below). GOOG is approaching Fib resistance once more. Puts on this look good with a contingent stop order at anything above $397.54
http://photos1.blogger.com/blogger/4311/970/400/0429-goog.jpg
at 3/29/2006 16 insightful comments
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Tuesday, March 28, 2006Fifteen Steps and a Stumble
The Fed announced their fifteenth consecutive rate hike today (I'm really glad I have a fixed rate on my house.....) and stocks - finally! - did the right thing and tanked. It's about time.
One blog reader wrote to ask me about the Fed Funds rate. You can get this from Prophet with symbol FF9413 (use a line graph, since it's one data point per day). Just for fun, I charted all our history on this versus the S&P. The correlation is bizarre. For a while they were inversely correlated. Then they seemed to be random. And recently it seems positively correlated! (Today notwithstanding). Anyway, draw your own conclusions (blue is S&P 500; black is the interest rate):
http://photos1.blogger.com/blogger/4311/970/400/0329-FFversusSPX.jpg
The breakout of the Dow I mentioned recently is now moot. Prices have fallen below the resistance line, so there is no breakout. In fact, this line is getting to be just noise at this point, so I'll probably chuck it soon.
http://photos1.blogger.com/blogger/4311/970/400/0329-DowFailure.jpg
Likewise the potential breakout on the Major Market Index ($XMI) I mentioned last Saturday didn't materialize (thank God) so, again, this is a bullish move that simply isn't going to happen.
http://photos1.blogger.com/blogger/4311/970/400/0329-XMIFail.jpg
What is happening, and what I did predict quite some time ago, is the Utilities are starting to fall to pieces. The best options I've found on these is on the UTH, but the bid/ask is big enough to drive a truck through. I've drawn two necklines for this head and shoulders pattern. It hasn't quite broken through the lower neckline yet, but if it does, you can see the target I've drawn here is a nice fat distance away.
http://photos1.blogger.com/blogger/4311/970/400/0329-UtilTarget.jpg
What we're looking for, people, is directional change. Nothing beats a stock that has been going up for years (and has the corresponding high price) which fundamentally changes direction. Below is CLF. You can see where it broke its upward trendline. And I've drawn a downward-sloping channel. There are not that many price points to support this channel yet, but it's not bad, and it illustrates the ship changing course from up to down. That's the kind of issue in which we want to buy puts.
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What we're looking for, people, is directional change. Nothing beats a stock that has been going up for years (and has the corresponding high price) which fundamentally changes direction. Below is CLF. You can see where it broke its upward trendline. And I've drawn a downward-sloping channel. There are not that many price points to support this channel yet, but it's not bad, and it illustrates the ship changing course from up to down. That's the kind of issue in which we want to buy puts.
http://photos1.blogger.com/blogger/4311/970/400/0329-DirChangeCLF.jpg
One developing H&S I've had my eye on is iShares Latin America (ILF), but it's relatively thinly traded, and the options on it are terrible (super thinly traded, huge bid/ask spread). Plus the pattern isn't complete.
http://photos1.blogger.com/blogger/4311/970/400/0329-ILF.jpg
However, a major component of this security is symbol UBB, which has completed breaking an H&S pattern (strictly speaking, the right shoulder is higher than the left, which isn't textbook perfect - - but I'll take it). I'd look to buy puts on this on any pullback to the neckline. It's a lovely chart.
http://photos1.blogger.com/blogger/4311/970/400/0329-UBB.jpg
I'll close with APC - - the OIH has been pushing higher lately, but I think it's going to soften very soon, and APC behaves very well. What I mean is that when OIH is weak, APC is especially weak, and when OIH is strong, APC isn't quite as strong. I like the puts on this, which are fairly heavily traded.
http://photos1.blogger.com/blogger/4311/970/400/0329-APC.jpg
Continued good luck, everyone.....nice to see some sense returning to the markets.
at 3/28/2006 10 insightful comments
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For your consideration, as we all await the Fed announcement (and the predictable crazy up-and-down hysterics for 30 minute afterwards). Arch Coal. Looks like a nice clean short. Stop price is anything above 78.60. It had a terrific run-up and seems to have tipped its hand clearly......the symbol on this one is ACI, and yes, there are options.
http://photos1.blogger.com/blogger/4311/970/400/0329-aci.jpg
at 3/28/2006 4 insightful comments
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Monday, March 27, 2006NZD/USD (One more time!)
The market is boring me to tears, and until we get the silly Fed business out of the way, I just don't want to talk about it. So how about a blast from the past?
This is the only FOREX trade I've ever recommended, but it's done fantastically well. I haven't looked, but I wouldn't be surprised if this was the best FOREX trade over that entire period:
http://photos1.blogger.com/blogger/4311/970/400/0327-NZD.0.jpg
What I want to point out to all the nay-sayers that visit this blog is the following: I was early on this recommendation. If you had checked the recommendation at various points after it was made, you could have said I was dead wrong. And the trade was a loser.
But the broad trend was there. And in the end, the broad trend crushed the little ups and downs, and my analysis was right on the money. It was a little early, yes. But it was ungodly profitable.
Something to keep in mind on those days when the Dow squeaks out a gain and people have Dow 19,000 on the brain.
at 3/27/2006 6 insightful comments
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Saturday, March 25, 2006Masquerade Bull
You won't recognize me today because I've stuck these bull horns on top of my furry head. I want to make an earnest attempt to make a bullish argument for the market, since I think taking an opposing view is probably healthy. I'm still a bear at heart (albeit less passionately so, given the market's frustrating behavior), but let's take a look at some charts which point up instead of down.
First, there's the Major Market Index ($XMI) from the Amex. This index is pretty unusual in that instead of ascending, pushing up against a resisting trendline, it's formed a nice inverted head & shoulders formation. It just barely sneaked above the neckline recently, but should it clearly break above this neckline, it could mean a clean run up to about 1,180 (its all-time high) based on traditional measurement methods.
http://photos1.blogger.com/blogger/4311/970/400/0325-xmihs.jpg
Argument number two is the fact that the market isn't seeming to "break", even in the face of a lot of bad news. We've got a war going badly. We've got what was formerly the mightiest corporation of the planet (GM) teetering on bankruptcy. We've got personal bankruptcies at an all-time high. And we have interest rates which have blasted higher and have taken the steam out of the housing market.
So where's the collapse in the stock market? Nowhere (yet). Here, for instance, is a chart comparing interest rates (black graph) to the S&P 500 (blue graph). Notice that the stock market not only doesn't seem to care about the higher rates, it actually seems to defy them!
http://photos1.blogger.com/blogger/4311/970/400/0325-tyvsspx.jpg
Argument number three is the recent breakout of the Dow 30. For many months it was pushing up against resistance. It has broken above this resistance, and it has not gone beneath it. So the upward line that was resistance is now support. I'd mention the same thing happened to the Russell 2000 on Friday.
http://photos1.blogger.com/blogger/4311/970/400/0325-dowbreakout.jpg
Lastly, a similar argument for the NASDAQ Composite. Besides the breakout, it's even got a cute tiny inverted H&S pattern above the breakout, which also suggests an upward push.
http://photos1.blogger.com/blogger/4311/970/400/0325-compqbreak.0.jpg
My bearish hope is that all of these charts represent the "last gasp" in the bull market we've seen over the past three+ years. But until and unless the prices clearly exhausted themselves and change direction, it's going to remain a frustrating, day-by-day wait.
at 3/25/2006 9 insightful comments
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Anyway, here are a few charts to chew on. First up is the Amex Major Markets, symbol $XMI. This is actually a pretty hefty inverted head and shoulders pattern (not shown here) which, if broken to the upside, would be very bullish (yes, bullish) for this market. Indeed, the price did cross above the neckline: but it took the very bearish behavior of slumping back below the line and, since then, sinking further still.
http://photos1.blogger.com/blogger/4311/970/400/0323-XMI.jpg
The Dow Transports (The Dow 20 to those really in the know.....) has been profoundly strong, but it, too, lost its grip on its ascending trendline and took a dive (these are intraday charts of about the past ten days).
http://photos1.blogger.com/blogger/4311/970/400/0323-Tran.jpg
Next is the S&P 500. Same deal. Ascending trendline. Couldn't keep the momentum. Started falling. It's going to have to punch through Wednesday's low, however, to get exciting for the bears.
http://photos1.blogger.com/blogger/4311/970/400/0323-SPX.jpg
Lastly, the NASDAQ 100 ($NDX). Considering the weakness today, this one was stronger than I'd like to see. As with the S&P 500, this index has to punch below recent lows (in this case, March 10) to get serious about a downfall.
http://photos1.blogger.com/blogger/4311/970/400/0323-NDX.jpg
at 3/23/2006 8 insightful comments
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Tuesday, March 21, 2006Failed Breakout - Hurrah!
Today was a really interesting one. The Dow pushed higher by about 50 points, started weakening, and never looked back. It wasn't a collapse by any stretch - - the Dow closed down 39 points - - but this kind of "pop and drop" day is wonderful, particularly since it's demoralizing to the bulls.
Let's first look at the S&P 500 index. Take note of the blue trendline above the prices (resistance, obviously). See how the prices are progressively unable to touch (let alone cross above) the line. Finally, see how the prices give up and surrender away from this line.
http://photos1.blogger.com/blogger/4311/970/400/0321-SPYIntra.jpg
The intraday chart of the Dow is similar, except this index shows more strength. In fact, it pushed itself to a new multi-year high today, only to see it exhaust itself early and start the descent.
http://photos1.blogger.com/blogger/4311/970/400/0321-DIAIntra.jpg
The longer-term view is what really counts. Below is a daily graph of the Dow 30 going back more than a year. As you can see, the prices did in fact move above an important resistance line a few days ago. If this line holds, it could be bullish for the market (hissss). If today's weakness follows through and pushes prices back below this resistance level, it invalidates the breakout altogether.
http://photos1.blogger.com/blogger/4311/970/400/0321-DIA.jpg
at 3/21/2006 9 insightful comments
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Monday, March 20, 2006Shorts!
Symbol: ATI
Why? This has been part of the super-hot steel sector. The run-up has been huge, and my feeling is that the trend has reversed here. Possible double top.
Close If Price Crosses Above: 58.45
http://photos1.blogger.com/blogger/4311/970/400/0320-ATI.jpg
Symbol: APC
Why? Good day today on this one (I bought puts last Friday). APC is one of the high-fliers in the oil sector. I've got a bearish view on crude oil, which flows into this suggestion. A break beneath its ascending trendline would obviously mean fireworks.
Close If Price Crosses Above: 101.03
http://photos1.blogger.com/blogger/4311/970/400/0320-APC.jpg
Symbol: BNI
Why? Double-top and part of the richly valued transporation sector.
Close If Price Crosses Above: 81.72
http://photos1.blogger.com/blogger/4311/970/400/0320-BNI.jpg
Symbol: RIO
Why? Head & shoulders pattern which has broken its neckline and retraced back to it.
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