Saturday, May 29, 2010

Friday, May 28, 2010

1930s redux

Not politics - just a buildup to the chart.

Even if you think Glenn Beck wears an aluminum foil hat to protect from mind control waves I still think everyone would benefit from his history lessons. And if that is not enough, perhaps you should know what the new Oprah can do for an author he touts. Millions of people seem to be responding.

He posted this chart from dshort.com on his show this week and it made the case that this decade is not like the 1970s but more like the 1930s. If you believe in the Elliott Wave rule of alternation then it makes sense since that was two major secular bear markets ago.

Anyway, it shows an an inflation adjusted Dow in the 1930s and the inflation adjusted S&P 500 of today. The peaks and troughs sure do line up nicely.

I was prepared to look for a long-term buy-and-hold buying opportunity late this year (when the seasonal, 9-month and 4-year cycles all bottom) but now I am not so sure.

And for you economists out there, weren't things similar back then? Deflation and lots of government spending?

Thursday, May 27, 2010

Buy oil stocks now?

I cannot give too much away here (what else is new) because I plan to do a bigger treatment next week but in case you thought capping the well would make BP a good buy.....

This stock is not even oversold anymore. Besides, you will be at the whim of the news makers. Too volatile for my blood. Pop a cap!

How about this one we bought in Quick Takes Pro yesterday. Never broke down. No death cross. Very limited outflows of money according to on-balance volume.

Wednesday, May 26, 2010

Hammer Schmammer

What everyone knows is not worth knowing.
- a wise stock market person of days gone by

EVERYONE was talking about the hammer candle on the major indices yesterday. Such resilience! Hammer out that bottom!
Well, today's column talks about how that hammer is not the same as previous hammers in the stock market. I won't give away the reasons here so you will make my editor happy and actually visit Barrons.com but I will give you something that I removed from the article.

This is a monthly chart of the S&P 500. It may not be quite textbook but that is a possible evening star pattern and as its name suggests, the sun is setting on the market. Only a major rally over the next two days (to end the month) would negate that view.

I cannot find any instances of this pattern on a monthly chart going back the beginning of my data (on eSignal). However, if you have the data you will see one in 1937. The result was not pretty.

Monday, May 24, 2010

200-day breakdown

OK, squint your eyes, tilt your head, scrunch your cheeks and pretend I made the leap to Communication Breakdown by Led Zeppelin with the title of this post. I did not sleep well last night and it shows.

Today's Barron's Online column is about the 200-day moving average and where the major indices are in relation to their respective metrics. Here are some charts I ran through in finalizing the piece. They are not part of it. You can draw your own conclusions but these are rather important stocks.





Friday, May 21, 2010

Bounce!

Bottom fishers were digging up bait this morning as the Dow went from down 100 to up 70 before lunch. With the Russell 2000 tagging its 200-day average and risnig trendline from July it was indeed time. How far will it go? Could be one of those rebounds that gets the bulls dumping their verbal @#$% on the bears again. I hope so. Let sentiment get all happy again and I'll sell the trendline.

The bear is back, at least for a few months. Go ahead and buy something if you wish. I am going to take a nap after a pretty good week.

Wednesday, May 19, 2010

Commodities Ouchies!

Although off the air now, a kids' show that was on a lot in our house was called Action League Now! (Nickelodeon). One character called "The Flesh" ("He's super strong and super naked!" — A blond, muscular, dim-witted bodybuilder who never wears clothes).

If you are still with me, his catch phrases included "ouchies," for when he got hurt. That is just what I have been thinking when it comes to commodities today. Ouchies! Everything except gold is heading lower and that is now how a recovering economy should act.

This is the old version of the CRB index, now called the CCI (continuous commodities index). I refuse to give it all of its corporate names (Thomson Reuters Jefferies and whoever next buys it).

Anyway, the old version previously owned by my former employer Knight-Ridder, measures lots of commodities and is not overly weighted on energy like versions that came out late in the 1990s. It worked pretty well to give us market clues. And right now, it has a nice little technical breakdown working. Take out gold and, well, you know.

If you don't look at our chart of the day on the home page, give it a look today.

The only "V" we will see is the cheesy sci-fi remake now on the tube.

Tuesday, May 18, 2010

Not so Wells Fargo

Here is a look at a short trade we did last Friday in Quick Takes Pro.

The chart showed a triple top (sort of) with defined risk and good risk/reward. Sold it Friday at the open at 32.76 and we are looking for first stop just under 30. We would be wrong on a move over resistance at 34. The only problem was the gap down open.

Note on-balance volume was falling throughout the trading range as a hint that money was already fleeing. The Feb low near 27 is not out of the question.

Monday, May 17, 2010

Docta Coppa

I've been writing a lot lately about copper. Many have dubbed it "the metal with the PhD in economics" due to its widespread use in many phases of the economy. Think electrical wiring, plumbing and pipes, air conditioning and heating, cookware, computer circuit boards, medical imaging and making brass.

Anyway, the point is that when copper prices fall it is due to perceived future demand from the economy falling off. If you look at copper trading today, the economy is in for some trouble.

Check out this giant metals miner - BHP Billiton. That is a completed weekly double top. I don;t care if the market came back to close positive today, things are weak.

Friday, May 14, 2010

Yeah, it's real - part II

On May 4, I posted "Yeah, it's real" saying it felt like January again and a decent correction was coming. Little did I know the Crash of 2:45 would shake things up so much. But here we are a week later and a trillion in the hole for Greece and guess what, the market is even weaker than before.

Can't reveal what we're doing in the newsletter but you can be sure we are not buying dips like the fundamental portfolio managers are telling us to do on the tube.

And your new favorite movie should be "Austin Powers in Goldmember."

Thursday, May 13, 2010

Explanation for the Crash of 2:45

Posted by Pierre Latour in a chat room.


It's quite simple, really :-)

Greed is Good

Well, greedy seems to be good for you wallet - until the next implosion. Pragmatic Capitalist did a better job saying something I tried to convey in this morning's Quick Takes Pro. Here it is, copied from the Seeking Alpha website:
-------------------------------------
So that’s all it takes these days to sweep a good crisis under the rug – cut a nice big check to all the people who made the bad decisions that caused the crisis. In no time we erase a few weeks worth of stock market losses. Government has everyone’s back. No one fails. There are no losers in this market. No risk. You truly can’t lose. You could buy the very worst debt on the planet and governments will make sure you remain whole. What a deal. It’s capitalism turned on its head.

Equity investors are clearly catching onto this trend and snatching up stocks with total disregard for any risk. And why shouldn’t they? After all, government will bail them out when everything goes haywire. It’s almost a guarantee these days.

In fact, the sad thing here is that you’re almost better off causing the next big meltdown. It goes like this – ramp up risk, make huge profits on the way up, record bonuses for everyone and then when it all goes bust you take none of the losses. Instead, the government takes the loss, you get bailed out and you start the whole game over again! Sounds fantastic doesn’t it? That’s what our stock market can be boiled down to these days. I’ve never seen anything like it. It’s great for all the gamblers. And horrible for all the regular joes.

The can’t lose market is back. Buy something. Anything! Who cares. It’s all on sale even if it’s not. And when it goes bust you’ll get a brand new model courtesy of Government Inc!

Wednesday, May 12, 2010

Tease!

Here we go again - a reason to think natural gas actually stop falling.

Alas, my poor heart can't take it.

Tuesday, May 11, 2010

Gold

Now can I get an attaboy for writing back in December that gold would correct close to, but not all the way to, 1000 before resuming its march to 1350? I'd rather trade this than stocks any day.

Unstable

The stock market is unstable - period. We had a Hindenburg omen type of signal last week and I am not talking about high levels of new highs and new lows at the same time. I am talking about up and down moves of huge size day after day after day - before the "Crash of 2:45."

Nothing is trending anymore. Everything jumps based on news and then just sits there making us guess rather than follow the trend.

But I am following the trend and it is down.

Monday, May 10, 2010

GS song of the day?

It's yer money I'm after baby
by the Wonder Stuff

Heaven's above, no I'm not in love
it's just yer money I'm after baby.
I'm sticking with you and, oh,
that's just because
it's yer money I'm after, baby.

I'm in love with myself
and nobody else

Friday, May 7, 2010

Web of Euro Debt

From the Ritholtz blog citing an article in the May 1 New York Times.

http://www.nytimes.com/interactive/2010/05/02/weekinreview/02marsh.html

Quite interesting and scary. I wonder what the web looks like if you expand to US, Japan and China.

Thursday, May 6, 2010

Gallows Humor

Memo To SEC

Lay off guys. We can do this anytime we want.

Regards,

Goldman Sachs

(stolen from John Copp)

Zanger update

In Monday's column, I got some of Dan Zanger's views on the market and he gave me some examples of stocks that had blow-off tops. This was one of the reasons he became bearish, looking for a 10% correction. I could not run the charts in Barron's Online so here they are.


The idea was that they were already top performers so people expected good news. Then they bought in a frenzy on good earnings, which were already baked into the price, creating a buying climax.

Wednesday, May 5, 2010

Retail Does Not Agree?

Monday, I wrote a piece in Barron's Online saying retail was ready to pull back. Indeed, things looked good Tuesday as everything tanked but take a look at Wednesday's action in stocks like Macy's. Bullish reversal on heavy volume.

Old bulls never die or the end of an orderly bull flag? Can't tell just yet but it did seem that the media swung pretty bearish pretty quickly.

Best guess - the S&P moves to the top of its flag-like pattern to make sellers look bad in the short-erm we do have a lower high and lower low in place.

Tuesday, May 4, 2010

Yeah, its real

I've been getting a lot of email asking if this is the "big one," as in down we go to the March low or below (do you like the rhyme?). Well, that is a bit premature (and I don't think we see a new low) but it sure does look a lot like January.

The difference is that sentiment was rather frothy despite what some of the surveys might say. Every bit of news coming out told us the economy was getting better and the stock market reacted like it was a total surprise.

I'll be selling the back and fill. I already have enough cash to be protected.

Monday, May 3, 2010

(sung) Just another melt-up Monday

With no apologies to the Bangles (since Prince penned that tune), it is indeed just another melt-up Monday (Manic Monday Lyrics). The market is still kissing Valentino on this one as the reasons cited for the lastest Monday rally are mergers and data.

Mergers? Airlines are merging not because they see hot business prospects but becasue they cannot survive otherwise. And don't get me started on Palm, which was plucked from the refuse heap for a song by Hewlett Packard last week.

The problem with all of this market joy now - not during March and early April but now - is that we already know the economy is recovering. Each bit of news we get does not really add to the body of knowledge. (I am tired today so insert your own rant here.)

Perceptions are so wildly wonderful now (what sentiment related indicator was it that is above its 2007 peak?) that we seem to be overlooking our brand new energy tax (not to mention an attempt to blow up a car in Times Square).

Tax? Well, sort of. What will happen when all sorts of Gulf restrictions filter through the system? And don't look know but we've already started to breach the $3 level at the pump. Yes, the national average is still $2.895 but the trend is frighteningly to the upside. And has been since before the oil rig blew up.