Monday, August 31, 2009

Barron's Online follow up - biotech

I think a standardized title when I comment on my current column is a good idea.

Today, the topic is biotech. The most interesting observation is that a bunch of them gapped up nicely in July, including HGSI, CELG, AMGN, PDLI (sort of) and AFFX. I'll let someone else figure out why CRA gapped down.

Anyway, the point was that there was a lot of oomph in July yet biotechs as a group 1) lagged the market and 2) started to retreat rather than hitting new highs with the Spoos.

Obamacare? Not my area.

Sunday, August 30, 2009

Commodity ETNs

They (the man?) are now looking into commodity based ETNs and ETFs with the intent to regulate or eliminate, I am sure. There was a halt in the natural gas ETF a few weeks ago as the sponsor could not get enough product to meet demand - thanks to extra-market forces.

I am not here to debate yea or nay. However, usually when a new ETF comes out it marks the peak in that particular market. It happened to steel. I cannot think where else on this nice Sunday afternoon but I know there are many other examples.

Anyway, if they (the men?) take these ETNs and ETFs away would that mark the bottom in the market?

Thursday, August 27, 2009

Volume Explained?

I just read a discussion on the web about volume. Specifically, it was about the lack of volume on a particular stock's breakout but it makes total sense for the market as a whole, too.

With all the off-exchange activity, ECNs and the mysterious dark pools (cue spooky music), it seems that volume as an indicator is going the way of the specialist on the floor. Its not that volume does not matter but the way it is reported is not working any more.

There goes all those volume based indicators. It was bad enough when we lost the power of tick based indicators like tick and money flow (birinyi/worden) when they went to pennies. Sayonara to cumulative volume and that other money flow I never figured out anyway (zweig?).

So, now we know how the market rallied for five months on shrinking volume statistics.

One more reason we need an overhaul on technical analysis.

Wednesday, August 26, 2009

An agita chart

OK master technicians, analyze this one. Big pop on earnings (not to mention an analyst upgrade AFTER it jumped). What is the trend? Where is resistance? What color was George Washington's white horse?

Is it any wonder we burn out?

Tuesday, August 25, 2009

A Medical Story

Here is a true story about someone I know.

Gentleman X was an older person with a complex medical history. Yet, he was vibrant and enjoying life until diagnosed with a small problem. He went for treatment and the treatment was botched. That kicked off a series of events that landed him in the hospital and literally at death's door.

His doctor did not return calls even when informed of the patient's serious slide. Right then and there, I would have gotten a new doc but the family said that you don' t change surgeons in mid-operation. In this case, he knew the history so everyone stayed the course.

Gentleman X is still in the hospital, by the way and his doctor is still making mistakes.

Sound familiar? Doc Bernanke and Doc Congress did not return calls. The patient was treated for tech hangover with oodles of cash medicine and look what happened!

As for today's news, what else was the Prez going to do? You can't change economic doctors in the middle of the treatment. To bad the patient is still in the hospital.

The moral of the story is that continuity of care is not always the best plan of action. But I am mot talking about Mr. Bernanke. The whole Wall Street crony system in the government has to be scrapped before they kill us.

"We saved the world!" (that's a question)

We are Munchhausen by proxy.

Monday, August 24, 2009

I'm just sayin'

China ETF chart offered without comment.
Snapshot taken at 2:55 ET Aug 24 (US market still open).

Sunday, August 23, 2009

Here comes the hate

Every once in a while, when I get into a deep analytical slump like the one that plagues me now, I notice the tipping point when the cards and letters get nasty. Hate mail has picked up quite a bit this month, not so much here in the blog but from my Barron's Online column.

It is funny how the love mail is always low but that is the nature of the beast. People only write in to complain about something - why did you cancel my favorite TV show, how can you like the current administration, who killed JR?

What is telling for traders is the more they want to puke on their keyboards after making a big trade the more right they end up being. The same goes for hate mail. When it swells, I get a contrarian feeling.

Institutions are quite bullish right now and cash levels are quote low, despite what you may have heard from the pundits. Manipulated markets or not, it seems that the mob is formed.

Saturday, August 22, 2009

Try fundamentals

Someone sent me an email (how about posting to the blog instead) after I lamented about the problems with technicals lately, saying I should try fundamentals. Which fundamentals would that be? The 81st bank failure of the year last week? Over 9% unemployment? Public opinion polls saying they are still not buying anything? Record foreclosures?

Technicals may be acting funny now but they beat fundamentals hands down, any day of the week. At a very minimum, there is a trend.

Thursday, August 20, 2009

What would Adam Smith say?

On days when I write my column, I like to see if I can do some follow up work to it. Sometimes I need to clarify the tone. Other times I need to un-edit my editor's changes. Today, or should I say yesterday, I wanted to do a bit more on cloud charts as that was the focus.

Well, it is holiday season and I am on the road again. After a 7 1/2 drive, I was in no shape to comment on anything especially after the drubbing I took in the market Wednesday. Ugh!

So, rather than talk about cloud charts, which you can yahoo or metacrawl all you want (I refuse to say google, just like I refuse to ask for a kleenex or open the frigidaire) there is something else on my mind.

Something is very wrong in the financial markets. I blogged the other day about stock trading jumping the shark as they actually ran an infomercial with an NFL coach talking about all the technical studies his boss company had - including "moving day averages" (that's a quote). Stock trading is the bubble. So is forex trading. The point is that too many people are doing too many things to try to master the market that the market is going to change the rules of the game.

Stuff is not working the way a free, capitalist market works.

Yes, I know the government is juicing the capital markets. But even without that it does seem that the deck is stacked against regular investors. No, not the little guy who is last to the party. That is and always will be. But even institutions with all their tools seem to be at the mercy of Wall Street financial engineers (or should I say imagineers, a la Disney?).

This market has changed and that is not necessarily bad. What it means is that we must find different tools and if that means a radical overhaul of chart reading, so be it. Breakouts, gaps, moving averages and the likes are not longer cutting it.

Tuesday, August 18, 2009

This time its different

No, not the most dangerous words in investing but conditions at the current decline are different than they were at previous one or two day pullbacks. Bad news is finally being punished. Volume finally swelled on the dip and dried up on the bounce. Pundits are all over the tube being very bullish. Current fundamentals are being dismissed and while the market is looking forward to what will be we cannot ignore what is.

But this market is not healed yet. Bubbles seem to be reflating ever so slightly as the villains survive to create new weapons of financial mass destruction. And I am not talking about Goldman Sachs and the boys. Ford is still making, well, Fords. GM is still making GMs. and AIG is still breathing at all, which is just not a good thing for anyone who belives in teh invisible hand of the market.

Sunday, August 16, 2009

Stocks have jumped the shark

I have seen many infomercials on the tube promising to teach us to trade our way to financial freedom. Up market or down, sideways or even what we have today, they parade their incredible success stories in front of us.

We've seen plenty for forex too. But usually there is someone who made some coin in the market behind it. Even if all we have to follow are red and green lights, up and down arrows , or just look at the calendar and place our bets without worrying about what is actually going on in the real market.

Although I had seen this one before, this morning I saw one for (beats me what its name was) with celebrity spokes person Jimmy Johnson. You know, former NFL coach with the perfect hair and owner of several superbowl rings.

OK, we've seen celebs prostitute themselves for informercials before. This time, good old Jimmy claimed he now trades stocks but when he mentioned things like the "moving day averages" (that is a quote) and Bollinger Bands I had visions of Fonzie on water skis. Stock trading has jumped the shark.

When the next leg down happens, and it will, people are going to flee the stock market for good. Then maybe our tools will work the way they did a century ago.

Thursday, August 13, 2009

How Sweet it is!

Have you seen a chart of sugar lately? Based on price action you might expect the world to lapse into a diabetic coma. Check this:

Apparently, there is a shortage in one of the great sugar consuming countries - India - and that has sent this market parabolic.

As they (meaning I) say, parabolic up, parabolic down. When this thing finally cracks, and don;t try to pick the top, it might be a nice zip line to ride down the mountain.

For you fundamental types, we are short Hershey in Quick Takes Pro. They use a lot of sugar, don't they? And we found it based on its own chart!

OK, technicals still work on individual stocks.

Wednesday, August 12, 2009

Lies, damned lies, and statistics

"Lies, damned lies, and statistics" is part of a phrase attributed to the 19th Century British Prime Minister Benjamin Disraeli. If you believe what the government is feeding you then good luck.

I am far from an economist so I cannot say that unemployment is what it is. But if you stopped looking for work you are not counted as "unemployed."

The Fed held rates steady today - no surprise. They also said they'd slow down their purchases of Treasury securities which is sort of the same thing as raising rates. Less liquidity is less liquidity.

The point of this post is to warn you not to believe anything but the market when you try to figure out what the market is doing. The technical tools are working a bit off but at least they are derived from the market. Economic statistics are man made, subject to revision and are no better than funnymental projections of next years earnings.

Tuesday, August 11, 2009

The Big Bang

In the previous blog post, I made the following comment and thought it needed its own post.

"As for the wall of worry and the slope of hope, I think none of our precious sayings and assumptions hold water these days.

I highly recommend a new skinny book - The Stock Market Philosopher written by a hedge fund manager. He likens (or lichens, for you naturalists) the stock market to the jungle and evolution. Adapt or die. Last year dumped the big meteor on the dinosaurs."

Usually, we see small changes in what works and what doesn't. I like the saying, "I worship in the church of whatever is working now." But usually, it is one assumption that breaks, not all of them.

I think we got a major wake-up call last year and since we were so close to economic disaster, at least that's what they told us, I think just about all of our assumptions broken.

Buy low, sell high? Hard to do when the volatility is greater than the typical expected profit.

Buy breakouts? The market breaks out and stops dead. We close or get stopped and then it breaks out again. Unless, of course, you buy the breakout, in which case it was a blow off.

I believe in technical analysis but if I were starting in the business today I would quit. The stuff we learn from existing literature has not done well for a year. It is only the experience to recognize evolutionary, if not revolutionary changes, in the analysis world that keeps me going.

Monday, August 10, 2009

REITs and vacations

Just to be clear, today's column takes a longer-term view. Buying them now after the past one week of rocket ship to the moon gains is not a good idea.

My point was that I like them a whole lot better now than the last time they rallied (April-May). Note, I did not say I liked them at these prices! It is just that the technical aura they now exude is more confident and certainly they are much farther down the road in terms of basing and recovery.

As for my first day off in eight years, thanks for the well wishing last week. There is nothing like sitting on a rock on a plateau above the tree line looking up at the summit with literally no people around for hundreds of yards. The silence was refreshing and recharging.

Why not revel in the actual summit? They say that Mt. Washington, where I was, has the worst weather in the country. They are not kidding. Not a half hour after my blissful rest stop it started to sleet and rain and the wind kicked up to 50 mph at the summit (70 mph gusts). Welcome to summer!

Sometimes the decision not to do something, as in brave the summit or chase a stock, is the best decision.

Wednesday, August 5, 2009

Vacation? What's That?

Thanks for reading this blog. I do appreciate your coming here.

Not including this announcement, the post below this one is my last for a few days. I am actually taking Friday off and it will be my first day off in eight years. I gotta get a life! If anyone has a nice steady job for me, or wants to underwrite a radio show or website I am thinking about, let me know.

The daily grind of being the "short order cook" of technical analysis has me pounding out the columns, newsletters and articles all the time. I won't bore you with the quantity but I have spent many a late night poolside at DisneyWorld with my laptop while the family sleeps off the day's park hopping. I've even written my column from Jamaica (the island, mon) spending quality time indoors instead of on the beach.

Anyway, I am not kidding about looking for sponsors. But it will have to wait as I'm leaving for New Hampshire Thursday morning after Quick Takes Pro comes out. I am hiking the White Mountains and will not have a phone, computer or carrier pigeon. What a concept!

Sentimental Lady - part deux

On July 24, I blogged about some frothiness in the market but the correction never came. Today, my column deals with more objective evidence. Yes, the AAII survey is there but thanks to an interview I saw with my friend Rick Bensignor, I have found a better one. Jake Bernstein's daily sentiment index really does have a hot track record and it is signaling a short-term top right now.

Tuesday, August 4, 2009

The Kahuna

We can all agree that the banter on a certain morning financial TV show can get out of hand. Yesterday, one of the morning anchors said something unbelievable and spot on. He said that with the market trading where it was 10 years ago (at the lows) all they have done for viewers was - and I quote - blah, blah, blah. He made a talking mouth gesture with his hands as he said it.

I was floored! They admitted all the analysis and parade of guests was merely noise!

Today, however, he really put his foot in his mouth. The other anchor said the word "engine" and anchor number 1 thought he said it funny. In a fraction of a second, he said "engine, not injun" and made the "whoo whoo" war cry sound complete with tapping his pouting lips. I am not Native American but man that was not good.

I think it was more "frat boy" than anything sinister.

The moral of the story is that everything you see on the tube and read on a financial website - including mine - can be good fodder for idea generation but do your own thing, make your own decisions and don't try to be funny 24/7.

I wonder if all media really do shape our thoughts. We waste hours and hours watching what a program director thinks the masses will like instead of getting out there experiencing real life.

Monday, August 3, 2009

Cash for Clunker Quickie

My wife just said we are getting clunked by the clunkers.

We are looking for a new car for my newly driving son (heaven help all drivers) so we will not be trading in any clunkers. Therefore, all of this temporary demand is keeping the dealers from giving me the really good deal we might otherwise expect from a hurting industry.

So, what happens when the money runs out - again? I think we will delay our purchase for a few weeks. My kid can borrow my car until then.

Broke(Green)Back Mountain

That was sort of the working title for today's column. I am glad the editor came up with something better, even if more boring.

The dollar is looking might sickly, isn't it? If the European banks are in better shape than everyone thought (witness HSBC and Barclay's earnings not showing the Grim Reaper on the Board of Directors) and four more US banks failed last Friday then perhaps there is reason why capital is fleeing this country.

We all thought that global stimulus packages would inflate all economies and therefore, since all forex pairs are, well, pairs it suggests that inflation and currency shifts should all cancel out. But one look at the greenback and ugh!

I am harking back to last year when I blogged about being mistreated during a radio interview when I talked about the weak dollar. (this is the link). I am sure that host was twirling his pointy mustache (actually, he does not have one but I am thinking of Snidely Whiplash) when the dollar rallied hard to the high 80s. But now, I have a warm bowl of crow for him to chow.

Last year's financial crisis caused a stampede to the dollar and the perceived safety of the USA. Now that risk appetites are back, the flight to safety is over and so is the temporary vacation in bull-land.

Are you listening Washington? A falling dollar can help exporters for only so long.

Sunday, August 2, 2009

My Favorite Talking Head

My favorite market maven on financial TV is Charles Payne. When I first saw him on the weekend Fox business block a few years ago I wondered how this kid was getting so much face time, especially since I had never heard of him before. Fast forward to the Fox Business Channel and I have become a big fan.

He knows his stuff. He tells it like it is. He has a level head and cool temperment. He is not too full of himself. He does not take sides although the capitalist in him does shine through. However, he does not force it down the viewer's throat.

Charles, if you are reading this, I invite you to address the Market Technician's Association seminars some time. If anything, it will get the knuckleheads in our profession to learn how to speak English and stop shooting themselves in the foot every time they open their mouths.

Hmmm, sounds like a certain guy in Washington.

You know my favorites, such as "if the market clears XXX then it has a good chance of possibly running 5 to 10 percent higher, otherwise, if it can't hold this level it might go down. Tell me you have not read this kind of commentary before. No wonder analysts get flamed in chat rooms.

In a future blog post, I'll list some more of my favorite non-information comments I have heard or read. Some of them are a hoot! And people still pay to read them. Unreal.