Daily Archives: July 10, 2010

Morning Walkabout

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I live a stone's throw away from the Stanford University campus. I was there with my son this morning, and I strolled around on my own in search of a good mocha. On the way, inexplicably, I saw this painted on a wall:

0710-ben

Yep. It's Ben Bernanke. I have no idea why. A little later, I saw that Stanford is building a grand new business school campus. It looks like the equity of my surname is about to have a major uptick for a long time to come!

0710-knight

Anyway, I've been in a broody mood all day. Looking at charts, though, the story is the same. They fall into two categories: (a) a huge, huge number of bearish setups (b) a small number of bullish setups based ONLY upon the fact they've been battered and look prone to having a brief "relief" rally (in other words, nothing truly bullish about them).

We're hosting a big party here at my house, so I'm done for the day; I'll be running around playing co-host. I hope everyone has a relaxing weekend, and although I'm sorry to hear of the heat on the East coast, I'm glad I was not a part of it! 

The Broadcom Tease and Today’s S&P

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Happy Saturday, everyone. I'm sorry I've been relatively quiet lately, being AWOL from comments and not posting that much. It's been pretty hectic here at the house, and anyway, these relief rallies don't put me in a very chatty mood.

I wanted to use today's post to point out one of my favorite examples of a pattern which hemmed and hawed for a while before finally blossoming into its full potential. Specifically, I am speaking of Broadcom in the summer of 2000. I wanted to use this example as an object lesson for those wondering what's going on with the purported head and shoulders pattern in the current equity markets.

Broadcom, like many networking-oriented stocks in the summer of 2000, was defying the crack in the markets (which began in earnest several months prior). However, it had formed a textbook-quality head and shoulders pattern. What was frustrating was that, after it broke its neckline – exciting BRCM bears tremendously – it made an obscene gesture, turned around, and pushed up again.

0710-brcm1

You can imagine the disappointment of BRCM bears after this little exercise, since the stock shot about 40 points higher from its supposed breakdown point. And then, to add salt to the wound, BRCM did the same schtick again:

0710-brcm2
  

It seems that the BRCM bulls were fighting very hard to keep that 135 level supported. At this point, the bears must have been pulling their fur out in frustration. Most cruelly of all, BRCM broke a third time – – and wiser bears surely simply rolled their eyes, crossed their arms, and did nothing. You can imagine what happened next:

0710-brcm3

In fact, the stock went on to lose another 50% of its value from even the lowest depths seen here, but you get the idea.

So what does the current S&P look like?

0710-es

My point is that a pattern made "impure" by such shenanigans isn't rendered useless; it still merits observation. As I am looking at individual charts, the furious "bounceback" is taking place (take a look at DCTH for a fine example, as well as BID) to relieve oversold conditions. But my sense is that this mini-rally fuel is going to run out soon, and I am positioning myself accordingly.

Charts From The Comments (Friday)

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A quick round-up of various charts posted to the comment section of SOH on Friday. Enjoy and discuss.

Hugo Figuyr posted:

I posted this chart last night…but it was a bit different…Spring
Jack mentioned "Very striking resemblance between the 66 – 82 period and
now, but you'd expect that to an extent as that was a secular bear
market following a major leverage-fueled market top"

The
question is..Are we running out of fuel?

Spx

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jayinasia posted:

TAZ was looking for a WAG. I know he'd rather have Tim's but here's one
for posterity.

Spx

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jesterx posted:

I have been long the Aussie $ Dollar since about the 0.83 level. I have
raised my stop on this bad boy and locked in some profits, but when I
took a closer look at the chart today I noticed something very
interesting!!!! Take a peek at the AUD chart below.

Aud

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elliott_surfs posted:

What is going on in me mind.

Es

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brentos posted:

Holding GDX calls into Monday. I'm seeing an IH&S – got in near the
bottom of the up-trending channel waiting to see if it holds – will take
some off at 51.54 and wait for target area on chart for 2nd half. Have a good weekend everyone.

Gdx

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=^.^=