Today was a pretty lame-o trading day for me for a couple of reasons. One, I am heavily oriented toward bearishness on energy/ags, and those didn't do very well (in spite of crude oil softening up a little bit); and two, in hindsight, simply sticking with my index puts would have been better than trying to jump into index calls.
Now, before anyone thinks I'm suddenly a wild-eyed bulltard, I will remind you that my bearish positions (55) radically outnumber by bullish ones (6). But, based on the charts I'm looking at, I still think the market is due for a brief bounce. It tried to do so today, but I think the end-of-quarter craziness (particularly with such an historic quarter) distorted things pretty severely. In spite of my pain today, I am still embracing the thesis that energy prices will soften substantially, which will provide a "reason" for a decent equity rally. My positions are laid out for a one-two punch in this scenario.
Now, I know everyone refuses to believe we will bounce until the $VIX zooms past 30. I'm not convinced. Maybe people are used to things sucking now, so the "fear" isn't as prevalent as before (perhaps the $VIX is as much as surprise index as it is a fear index). I don't insist on a VIX spike.
If we have weakness again tomorrow, I will be double-bummed, not only because of my index calls (gack, it's hard for me to even type that) but because of my closed-out index puts. But looking at the $INDU, I would feel radically more comfortable buying puts if the bulls fought their way back to the area just below 12,000.
The QQQQs touched their Fibonacci retracement today. I'd like to see this bounce up to the next level higher, at which time I would re-acquire $NDX puts.
That's it for today, folks. Again, this will be a shortened week - - normal trading for just a couple more days, then an abbreviated session on Thursday. Thanks for stopping by, and good luck to all Slopers!
Thanks for your patience waiting for this post. I've been thinking long and hard about the markets, and I've got a number of things to share.
First, let me tell you something about me and bull market rallies:
(1) My timing tends to be very precise; ironically, my timing on bull rallies is way, way better than figuring out when bear plunges are going to start.
(2) My ability to trade them is horrible; in spite of me sharp eye for rallies, I tend to buy calls, get scared at the first inkling of trouble, sell the calls at a tiny profit, and "fight the market" all the way up, getting trashed all the way.
One day my knowledge of this behavior will cause me to - gasp - actually behave properly. Let's see if I can actually manage to get it right this time.
Let's take the last instance I was strongly bullish - in a post called, aptly, 180 Degrees, I stated (somewhat sheepishly) that I was bullish, particularly on China. The performance of the charts is shown below, with the date of the post marked with an arrow.
There's a lot of talk about how there isn't capitulation yet, so therefore the market has to fall a lot more. I'm not convinced. Let me put it this way - if the $VIX was a stock, I would short it right now.
As I look at the various indexes, I see much more likelihood of a lift than a fall. Here the $COMPQ shows a spinning top, right on its channel line. Notice the similar formation back in mid-April.
The $INDU is well beneath its lower Bollinger band. My feeling is that it will push higher toward the 12,000 mark, tinted below.
The $MSH behaved just as I thought it would, but I think it's ready to head back to the lower levels of that tinted zone.
And, in turn, I would look for the $NDX to get back to a level of about 1900, if not a little above.
Although I am still targeting the $RUT to fall to that tinted zone, I would feel far more comfortable buying puts if it fought its way back up to that $717 level.
Below I have marked the instances in the past couple of years where the S&P was at the bottom of its Bollinger range and the RSI has broken below the 30 line. As you can see, it typically occurs during a medium-range bottom.
Looking at individual equity, the carnage is simply amazing. I think it's time for a breather. Gigantic Bank of America has fully exhuasted its targeted range after it broke below this pattern.
Google is sporting a huge hammer formation based on last Friday's action.
Looking at the past couple of decades of JP Morgan, we are at a major lower, based on the supporting trendline as well as the broadening top formation.
Industry cousin Lehman Brothers is also at the deepest levels of the Fan lines, matching its mid-March lows.
PFG saw a surge in volume as it approach the lower supporting line of its descending channel.
And, as a person with many energy put positions, I was intrigued by the doji shooting star on the USO.
So, in sum, what I'm banking on is:
+ A drop in crude oil prices (and energy/agricultural equities)
+ A lift in equity prices, broadly speaking
+ An opportunity at a later date (how sure, I'm not sure, although I typically figure it way, way too early) to re-enter equity shorts for the next leg down.
And so, as midnight approaches on Sunday, I'm off to bed. This is a shortened trading week, but it's going to be a doozy.
The title seems contradictory, I know. But there was a huge amount of activity without much change in my portfolio. My feeling is that today representing a hammering-out of an intermediate-term bottom.
I've done a LOT of posts this week, and I'm going to take a break. I'll probably do something this weekend. Until then, thanks, and swing on back later to see if I've written anything new!
The index charts were screaming "buy!!" to me. That doesn't mean I'm dumping my gazillion equity puts, which I think have reasons of their own to fall. I have, however, bought into a largish call option on IWM this morning. Simply stated, when I look at the chart of the S&P 500 below, the technicals for a bounce are too compelling. I eagerly await the day when indexes are a "steal" to short again, but for now, I'm going to play this one long position.
The same caveats as always..........take it as a contrary indicator...........call me a traitor.........and so forth. I'm buying SPX calls. I think we're in for a bounce. And I'm going to try to have the discipline to stick with it for more than, oh, a day this time.
I have been relatively ham-handed this morning. I've got a ton of profits, but I bailed on my $RUT puts about $5,000 too early (e.g. left money on the table). I am, as a bear, nervously watching the $INDU (which is at new yearly lows this morning) approaching its 38.2% retracement level. It's a fantastic morning, but it's unnerving.
5:30 a.m. - Son wanders into bedroom, gets me out of bed
5:30 a.m.-6:30 a.m. Catch up on emails, look at charts, tidy up house - generally be prepared for the day
6:30 a.m.-7:00 a.m. Watch the market and assess the lay of the land; consider what stops to update, if any
7:00 a.m. Well-prepared for the trading day
Today, instead, it went more like this......
5:00 a.m. - Son tries to wake me up; I tell him it's too early
7:00 a.m. - Eyes open, glance at clock, I see the market has been open for half an hour; I fly down the stairs. I see all the indexes are way down, but I have no idea what has happened the past half hour, no idea what the charts look like, and no time to prepare. ARGH!
After a very hasty glance at the index charts, I bailed 100% out of my Russell puts and IWM puts. It is very rare I screw up like this, but I'm off to a late start. The morning is good so far, and I'm trying to determine if I should go long anywhere. Feh!
All my fretting today was pointless. As is so often the case, just letting the stops do their work, and let the market go where it will, is the best policy. As most of you know, since I was on a plane during most market hours today, I was really stressed out about what I was missing. But, in spite of all the ups and downs - some of them terribly worrisome - it ended up just great. This is the kind of screen I like to see on my portfolios.........all red at the top (the indexes) and all green at the bottom (the net daily change for each of my positions).
I've got to say, since I'm a hopeless worrywart, I am starting to be concerned about an intermediate term bottom. Looking at the Dow 30, for instance, there's a pretty formidable Fibonacci line coming up at around 11,500, which isn't that far away. We have, after all, fallen about 1300 points in just the past month or so.
The Transports, too, are nearing a Fibonacci level, although please note this retracement series is on a much shorter time scale than the $INDU's, above.
My "purple line in the sand" turned out to be just as strong a level of resistance as I hoped. We are getting close to a channel line that - - yet again - - could represent substantial support.
Let's keep beating a dead horse here..........the $NDX is already at its Fibonacci level, and its "spinning top" candlestick suggests a pause here. What better day for a bounce up in the market than Bernanke & Company's announcement.
Oddly, the Russell 2000 looks like a good, solid short to me. I've got a bunch of puts on this, and they're doing terrific. I've tinted in green the target price level. So I'm sort of in love with the $RUT after a hiatus.
As disgusted as I was with OIH, I still watch it, and I really do wonder if we're seeing a failed breakout here. This pattern is pretty ugly for the OIH bulls. It's just one day, but it's not a good sign for them.
The following avalanche of charts I offer without commentary, except that I really, really like 'em (and have either puts or short positions on each of them).
Tomorrow (Wednesday) is going to be pretty interesting. We've got durable goods orders in the morning, then Bernanke at 2:15 EST, and them a bunch of interesting earnings (ORCL and RIMM) after the bell. I'll probably do a post sometime intraday. See you then!
I received a lot of nice emails about my weepy post regarding George Carlin's passing today. I appreciate those. Sometimes people would rather share thoughts privately than publicly, and I completely understand that.
Please be reminded that I'm traveling on Tuesday, so there will be no post until after the market's closing. I'll be nervously fidgeting in the air, not even benefiting from seeing how the market opens. I'll have a brief intra-market-day layover to check on things. With the Fed announcing on Wednesday, hopefully Tuesday will be sedate.
I'm pretty excited about the prospect of IWM breaking the blue line you see below. I am getting re-enamored with the Russell as a trading instrument.
Whereas I'm sick and tired of energy. This has been a boondoggle. I think I'm just going to stay away from OIH for a good, long time. Maybe crude's oil to $500 a barrel. Who knows. I'm tired of guessing.
RIMM, which I think reports after Wednesday's close, is just a shot-in-the-dark on my part. This is one of those "well, it's got to fall one of these days" plays that either goes to $0 or works out great.
Bank of America is the biggie out here in California, and I'm just blown away by what kind of fall this is taking. It has lost about 50% of its value in the past year. Below is a ten-year, weekly chart. What a plunge!
I'm glad I gave up on my GENZ puts. I made a small profit on them, but I was noticing it was not behaving as it should, so I got out. When a pattern acts abnormally, that's a sign to move on. Doing so worked out in this case.
I'll close with this video, which was from Carlin's last HBO performance. It is simply brilliant. For those who don't know any better, the language is pretty blue in some places, but this 10 minute clip is a fantastic example of Carlin's genius as a writer, performer, and comedian.
It's very rare for me to get choked up over a well-known person's death. Steve Jobs will die someday (as will AAPL's stock price, simultaneously), and I'm sure that'll affect me emotionally. By and large, when someone famous dies, it hardly matters to me. But when I heard George Carlin died last night, I was really saddened.
For those acquainted with Carlin's work - - and my blog - - this probably comes as no big surprise. His cynicism and ragings against our modern world line right up with mine. In fact, he probably had more influence on my own thinking and disposition than any other cultural figure.
I think one reason I felt such a connection to the man is that I think I understood where he was coming from. Many people might consider Carlin to be simply a misanthrope. A grouch. A jerk. I understand him as a brokenhearted idealist. His verbal assaults against America and its citizens came out of a deep love for the place, since he always wished for so much better from his country and its people. Much of what he observed was disappointing and infuriating.
I experience those feelings most days. Just today, during a walk, I saw an enormous Hard Rock Cafe, many stories high, and beneath its garish logo was a huge neon sign (which is part of their signage) that said Save The Planet. The combination of conceit and hypocrisy in such a sign is disgusting to me. And I doubt I'd have even noticed it were it not for Carlin's endless stream of HBO specials, CDs, and concert performances.
The world is a lesser place with his absence. And he is an example of something else I've noticed - - that some of the best Christians I know are atheists. George was very outspoken about his purported disbelief in God, but here again, I think we are witnessing a yearning spawned from disappointment. Many supposed Christians, of the nitwit variety, would assume Carlin was sent straight to Hell for his atheism, to be tormented for an eternity.
What crap. My belief is that George is already with his maker, who has already told him - -on some astral plane - - that He thought he was a funny son of a bitch.
Well, I guess the Saudi announcement on Sunday didn't mean squat. Energy is just as "up" as ever. I'm typing this 40 minutes into the trading day, and the initial pop in equities has faded somewhat.
I have, after careful observation over the past week, concluded why housing prices in Palo Alto are several hundred percent higher than the rest of the country. It's because much of the rest of the country sucks is less optimal for enjoyable living. At least here in Baltimore.
I keep getting accosted by homeless people, even when I'm eating in a restaurant. Just last night, I was having a nice dinner (in a relatively nice part of town) in the outdoor portion of a restaurant with family and friends. Up comes this bedraggled guy.......
Homeless Dude: Hey, there.....
Your Humble Narrator: Kee-rist.....
H.D.: Hey, can I have something you don't want?
Y.H.N.: Errrr, sure (grabbing big basket of fresh bread)
H.D. (staring at it): This is just bread!
Y.H.N.: (pausing for a moment in amazement): Haven't you ever heard beggars can't be choosers? {Editor's note: I realize that in this modern age, he probably thinks of himself as Chronically Disenfranchised or something, but I still consider him simply a bum....)
H.D: Well. All right (Takes baskets and leaves; the restaurant will never see that basket again)
In any event, I'll be flying off tomorrow morning back to the land of zillionaires and wannabes. At least the homeless people there will be ones that I know.
My favorite part of the day is reading to my beloved children at night. (Indeed, I have had such vast experience reading these books, I keep toying with the idea of doing an excursus for my readers on Curious George; one day, perhaps; and I'm serious about this.) Many of their books tend to be science-oriented, even though my kids are pretty young.
Tonight I was reading a book about genetics; I get a little sheepish when it gets to the sperm and egg part, but I did read the bit about how all human embryos start off as female but, after a few days, about half of them become male. A portion of the dialog with my son (who, by the way, is gorgeous, thanks to his mother's genes, not mine) went like this:
Son: "So everyone on earth would be a girl if that didn't happen?" Dad: "That's right" Son: "Oh, that's good. Otherwise it would be pretty unpleasant."
Oh, he's a wise one.
The big news in the market today was that crude oil took a wallop. But don't be confused. The past ten sessions have been nothing more than a trading range between about $131 and $139. The market doesn't know what to do with itself. If it pushes above $139, you're going to see an explosion to the upside. And if it breaks below $131, I think we'll easily move to $123. The longer this range persists, the more substantial the eventual break will be, regardless of direction.
The sucky part for me was that almost all the profits tacked onto my portfolio yesterday was eliminated today. I don't mind if I suffer a "wash" if the Dow is down 130 points one day and up 130 points the next. But if the market is down 130 points and then up merely 30, and I still am no better off, that worries me. Why shouldn't a 130 point tailwind help me more than a 30 point headwind?
Even more troubling to me is the graph below. Friday is quadruple witching, and the bullish engulfing pattern expressed by the NASDAQ could make for a bullish day. The market really needs to take it on the chin for me to have a good Friday. Otherwise, I think it's going to be in the hands of Beanie & Friends.
The Russell 2000, on which I own puts, has been stuck in its own trading range for many weeks now. This isn't at all a clean pattern. A break below 717.50 would be terrific, but I'm not holding my breath.
And OIH, which came within two pennies (!) of my stop price earlier in the day, sported a nice bearish engulfing pattern. But let's keep in mind the range I was talking about. Unless crude slips beneath $131, we'll just continue farting around. And a push higher by crude could supercharge OIH above the $220 level.
A number of red-hot stocks, like MOS, POT, and CNQ (below) had some pretty big dollar drops today. The next few days could be interesting for these issues.
I'll probably have more to say tomorrow (although if the market roars higher, I'll probably be too bummed to say much). I'm off to bed now. And I leave with you this - - a local story from Maryland, the state I am currently visiting. This has to be one of the best headlines. Ever.
Oh, Lawdy, Lawdy. I went to bed at 2:45 a.m. Wednesday morning, having packed for hours. I had to get up at 4:00 a.m. to get ready for the trip. Off the plane goes at 6 a.m. Change planes in Salt Lake City. Arrive here in Baltimore. And it's past midnight, and I'm still up, looking at charts. Gawd. (Update: Errr, I collapsed in a heap at 12:30 and got up at 6:30 to resume........sorry!)
During the aforementioned layover, I was pleased to see the Dow was down 95 when I got off the plane. Soon after, it was down 125. When I got back on the plane, it was down only 65. I had, during the layout, tightened up stops and trimmed index puts a little. But I'm glad I didn't get too aggressive with tightening stops. The action today was spastic, and I was relieved when I finally landed (after the market had closed) to see the Dow was down over 130. The chart of the $NDX below shows how, in the course of one day, the market was just all over the place. It looks like one of those contrived wall charts you see drawn as background in one-panel cartoons.
I'm starting to get a little cautious in my immediate-term bearishness based on the Dow approaching the rising trendline you see below, which indicates the higher lows that have been established through the course of 2008. I'd feel a lot more comfortable seeing this trendline broken. We're very close to it now, which could mean another bounce.
The $COMPQ is more clear, with a relatively clean path down for about another 100 points (barring any general market strength!) The 2325 level seems to be the next logical resting place.
The Russell 2000 has a bit of support at the dotted red line you see drawn around $718. We'll need to break that in order to have some downward momentum. I'd say doing so would clear a path to about the $670 level.
Adding to my cautiousness is the $OEX, which is approaching a big Fibonacci retracement level. The move from 660 to about 600 may be all this has to offer in the medium-term.
I like the pattern AAPL is carving out, with a retracement to a major trendline completed and a dainty series of lower lows and lower highs over the past six weeks. My target here is around $161.
Coach has been a favorite short position of mine, and it will get to be even more favorite if it pushes past the green trendline shown below. That would be a pretty important break.
I'm an idiot for having puts in ACI. Trying to guess when a momentum stock has topped out is lunacy. Shame on me. I bet I get stopped out of this one today.
I'm less of an idiot for my CEG short position, which has a major broken trendline and general downward movement for the past seven months in its favor.
One of the most valuable lessons I've learned from the readers of this blog is to stay short on weak securities (sounds obvious, but I have always had such a penchant for trying to bring down crazy momentum players, this is somewhat of a revelation). The fact is that battered issues tend to get more battered, and I'm experiencing that with SHLD. I am simply going to keep hanging onto this.