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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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Tuesday, April 25, 2006Stop Me If You Think You've Heard This One Before
The saturation of green on my screen from my short positions is my simplest, favorite indicator that things are clearly going the way of the bears. (Da Bears....) Lovely stuff.
Crude has double-topped. Energy stocks are completely exhausted. And hyperbolic insanity like CRS and TIE are reversing. Beautiful.
Let's take a look at a few charts.
First is the Dow. I want you to look at something interesting (particularly you, hurricane5.....) I've highlighted in green all the bullish rises over the past 18 months or so. Do you notice a trend here?
(1) The length of each rally is progressively shorter
(2) The gain of each rally is, by and large, progressively smaller.
The most recent one is just pathetic. The "rally" lasted three days. (Constant reminder: click any image to see a much larger one).
http://photos1.blogger.com/blogger/4311/970/400/0425-dow.jpg
Crude oil has reached a complete saturation point in the media. Everyone is talking about the spectacular rise in crude, in gold, in copper, silver.........and, as all good contrarians know, when every flippin' schmoe on the planet is talking about how high or low something is, it's probably time to fade the position. Crude tried to push higher today, but went limp fast.....
http://photos1.blogger.com/blogger/4311/970/400/0425-crudedoubletop.jpg
Look at Genentech (DNA). Head & shoulders patterns do not come much cleaner than this. I could absolutely see this heading down to $60.
http://photos1.blogger.com/blogger/4311/970/400/0425-dna.jpg
A similar pattern, mentioned here many times already, is Express Scripts (ESRX). I still have no clue what this company does (and I take a certain amount of pride in that, being a pure technician). It's a stupid company name - - do they write screenplays rapidly or something? No matter. It's headin' down.
http://photos1.blogger.com/blogger/4311/970/400/0425-esrx.jpg
And from our Tilting At Windmills department, I humbly offer a NTRI chart once more. This dynamo rocketed higher today based on blowout earnings. I dunno; looking at the trendline, I'd like to think it's reaching its potential at this point. But I've been wrong on this one more than once before!
http://photos1.blogger.com/blogger/4311/970/400/0425-ntri.jpg
at 4/25/2006 9 insightful comments
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Friday, April 21, 2006Bigmouth Strikes Again
What a week! In spite of the Dow going up consistently this week, it seems broader markets are petering around. The NASDAQ in particular, falling over 1% today, is definitely showing signs of age.
Below is the $SPX with Bollinger Bands. As you can see, it's way up at the tippy-top of both the resistance trendline and its Bands. It seems a softening from these prices is just about inevitable.
http://photos1.blogger.com/blogger/4311/970/400/0421-spx.jpg
The Dow Utilities, which is critical to watch since it is inversely correlated to interest rates, has its head & shoulders pattern plainly intact. I've put an arrow indicating where it has not overcome its downward-sloping trendline. The green shaded area is the price target I've set.
http://photos1.blogger.com/blogger/4311/970/400/0421-util.jpg
One contrary chart I've got is $XMI (the American Major Market index) which, if it breaks above the line shown, would give a bullish signal. It has been repelled by this line in the past, although it made a weak attempt above it recently.
http://photos1.blogger.com/blogger/4311/970/400/0421-xmi.jpg
Express Scripts (ESRX) looks better than ever as a short. It failed to penetrate its descending trendline, and it gave a bearish engulfing pattern today. This on top of the important fact that it's in a marvelous H&S formation.
http://photos1.blogger.com/blogger/4311/970/400/0421-esrx.jpg
Lastly is Unibanco Uniao De Bancos (UBB), which is in a similar pattern as ESRX. Same reasons, same prediction.
http://photos1.blogger.com/blogger/4311/970/400/0421-ubb.jpg
Enjoy the weekend, everyone!
at 4/21/2006 11 insightful comments
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Thursday, April 20, 2006What's the Frequency, Kenneth?
First, for those convinced I only do bearish picks, I'd like to refer tofor BankRate (symbol RATE) where I suggested buying it when it was about $20. It has, in the 10 months since then, shot up about 150%. Not bad for a bear, eh?
http://photos1.blogger.com/blogger/4311/970/400/0420-rate.jpg
I'm going to let the charts do most of the talking now. Here's the $SPX. As you can see, it couldn't cross above its well-established resistance line. It seems the recent (admittedly lusty) push higher is out of steam.
http://photos1.blogger.com/blogger/4311/970/400/0420-spx.jpg
Gold had a big down day today, after doing little put soaring the past couple of years. Prices don't go up forever, I guess, even in manic commodity markets.
http://photos1.blogger.com/blogger/4311/970/400/0420-gold.jpg
Here's the NDX, which spent almost the entire day in the red, in spite of the Dow being up over 100 points earlier in the day. Weakness here is key. As I've said repeatedly, a cross beneath the lower trendline would be great news for us bears.
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Here's the NDX, which spent almost the entire day in the red, in spite of the Dow being up over 100 points earlier in the day. Weakness here is key. As I've said repeatedly, a cross beneath the lower trendline would be great news for us bears.
http://photos1.blogger.com/blogger/4311/970/400/0420-ndx.jpg
The Dow Transports seem to have topped out as well.
http://photos1.blogger.com/blogger/4311/970/400/0420-tran.jpg
And the beloved VIX......can you say "overconfident"? Seems to me the market is counting on perpetually higher prices. The fear factor is just about nil at this point.
http://photos1.blogger.com/blogger/4311/970/400/0420-vix.jpg
Below are the current symbols for my potential shorts (upper list) and current shorts (well, actually, they're puts, but it's close enough).
at 4/20/2006 5 insightful comments
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Wednesday, April 19, 2006How Soon Is Now?
These are the times that try bears' souls.
Oh, my fellow doom-and-gloomers, it's been a tough few days! Indeed, it's been tough since, oh, about October 2002! Ah, well. Hope springs eternal in the savage breast. And the one bullish glimmer in my black bearish heart, the stock of my employer, has been up quite a bit lately. So at least that's going well!
Let's start off with a couple of interesting short picks. One is pretty risky and the other is fairly obvious.
The risky one is Allegheny Technologies, the specialty metal producer which has been on a huge tear for three years, up over 2,500%! Check out the trendline I've drawn, which was violated a year ago. The prices have finally pushed their way back up to the underside of this ascending resistance line, and this "kissing the underbelly" represents a relatively safe place to short the stock. I'd put in a stop price of $75, because this is a very strong stock.
http://photos1.blogger.com/blogger/4311/970/400/0419-atitrendline.jpg
Another reason ATI might be a good short is that, on the whole, volume has been getting lighter. Notice the line drawn on the volume graph below and see how volume has been generally waning in the face of the stock's ascent. To be fair, the dollar volume of the stock is probably pretty steady.
http://photos1.blogger.com/blogger/4311/970/400/0419-ativolume.jpg
One short I've had a while which is doing nicely - and continues to look promising (particularly considering its fall during the last couple of super bullish days) is McKesson (MCK). It's a lovely topping dome pattern, pure and simple.
http://photos1.blogger.com/blogger/4311/970/400/0419-mck.jpg
I'm watching the Nasdaq 100 ($NDX) very closely, because a fall-away from the saucer pattern being built would be very bearish. Notice how the prior two saucer patterns were much, much bigger than the current one.......and they didn't even go up that much even when complete. What we want to see is (a) a failure for the saucer to form and (b) subsequent to that, a cross beneath the trendline shown here.