Daily Archives: July 7, 2010

The La-Z-Boy Indicator

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One of the more dramatic drops in small cap stocks has been La-Z-Boy (LZB), having lost about 60% of its value in just a couple of months.

Today alone, LZB climbed over 10%, and it could have another 20-25% to go. But once this stock, and others like it, reach major resistance (tinted here in green), I think the market as a whole is going to resume its drop, except that it's going to be much more dramatic than before.

0707-lzb 

I have a very important personal celebration tonight, so this might be my last post today. I'll see you here in the morning!

Five Days. Fifty Percent Loss.

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I've met Elon Musk before. He's a cool guy, and an amazing entrepreneur (PayPal, Zip2, SpaceX, Tesla). And I've been to the Tesla showroom any number of times. The Tesla is a gorgeous, astonishing car.

But I wasn't even a little bit tempted to jump into the Tesla IPO last week. In the course of five days, there are investors (if we want to use such a term) that are already down 50% on their, errr, investment. Remember the old saw – IPO stands for It's Probably Overpriced.

0707-tsla

Gap Fill Well Underway

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The bulls are finally having a day of their own, as the Dow rockets about 250 points higher. As usual, the volume is much heavier on down days (suggested by the green highlights below), and the gap created June 29 will soon be closed. For myself, I'm having a down day, losing a little more in percentage terms than the market overall. I have taken advantage of today's rise to add to my existing short positions.

0707-SPY

Another Reason for Americans to Hate Soccer (by Nathaniel Goodwin)

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I just read an article explaining that illegal World Cup gambling
in Africa is the reason gaming stocks are down. LOL!

Well the World Cup will be over soon, and I’m thinking that
all gamblers around the world will be heading back to their favorite casinos
for some honest legal gambling.

BYD

Speaking of Africa, here is one of my favorite jams if you are bored by today's action.

Precious Metals Still in Strong Uptrend (by Springheel Jack)

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I was planning this as a post this weekend, but as it is possible that
the targets I'm looking at may be hit before then, I've decided to bring
it forward.

I was reading John Murphy's post last week talking about serious
technical damage done to the GDX uptrend, and then assorted suggestions
of imminent distaster in precious metals in various places, but notably
yesterday in Clusterstock
Chart of the Day
.

For me the essential driver in the long precious metals rally is the
loss of confidence in fiat money due to the easy money policies of the
last decade, and the wild printing of new money to support economic
growth in the last two years. There is little sign of this ending in the
US particularly, and every chance that it may accelerate if we see the
weakness in equities this summer that I am expecting, so I had a careful
look at GDX, silver and gold to see whether I could see any sign of a
significant reversal.

On gold we have a two year old rising channel and while we are falling
towards the lower trendline of that rising channel, until it breaks we
are just looking at a potential opportunity to buy at support in the
1153 – 1160 area. Here it is on the Gold Futures (Aug) daily chart:

100707_Gold_Daily_Rising_Channel

On silver I see the same two year rising channel with a potential
opportunity to buy at support in the 16.60 area, here
it is on the Silver Futures (Aug) daily chart:

100707_Silver_Daily_Rising_Channel

On GDX, I see an eighteen month old support trendline that will give
strong support in the 46 area, but I also see what may well be a
rectangle, with a recent partial decline. These rectangle 'tops' break
upwards 68% of the time, and a partial decline predicts an upward
breakout 89% of the time. If rising trendline support at 46 breaks, then
rectangle support should be found in the 40 – 41 area.

On an upward break of this rectangle the upside target would be almost
70, though I would add that the rectangle needs more crosses within it
to be a stronger pattern, and that rectangles that take more than six
months to form tend to be less likely to reach target.

Here it is on the GDX weekly chart:

100707_GDX_Support_Trendline_and_Rectangle

All in all I'm not seeing any sign of weakness yet in gold, silver or
GDX. I am seeing a rare opportunity coming to buy at longer term
support.

Only if these channels and patterns break would we be seeing a real
reversal.

An Email From a Reader about the SPX

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1.  2009 Low – 666; 2010 High – 1,219.  38.2% retrace = 1,008.  Thursday's low was 1010.
2.  TLT didn't come close yesterday to testing Thursday's high.  I know we are all supposed to worship the $VIX as the fear index but long term treasuries are the true barometer of fear in the form of flight to quality.
3.  Almost every major index is following its downsloping trendline since the May flash crash.
4.  CNBC has picked up on the break of 1040, published Prechter's views, and pointed out the H&S formation.  If CNBC sees it I don't want it.

To me, this is a very simple view of a complicated market.  I've attached the chart of the $SPX.



0707-spx