Daily Archives: July 22, 2010

2010’s One Meaningful Drop

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OK, blogger's guilt strikes again. I want to get this off my plate.

I've re-examined all my Big Picture posts, and I actually haven't changed my mind one bit – – for months I've had an eye toward 925, and 925 is still where my target is at. I had drifted into "875" for some reason, but that's too low.

The 1937-1942 analog calls for a drop within the next couple of months somewhere between the two highlighted cyan areas (ranging from about 875 to 1010). Based on a number of measurements I've done, around 925 to 930 makes the most sense. I've tinted the general target zone.

0723-spxprediction

As proof this is not just Wishful Bearish Thinking, my view is that this will be pretty much all the fun the bears can count on for many months to come. Indeed, if we were to enjoy such a drop, I'd pretty much go to almost-all-longs mode for a while (wouldn't that be something?)

Anyway, Friday should be interesting. Last Friday certainly was. Good luck to us all.

Road to Nowhere

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With the exception of commissions-based brokers, it's hard to believe there's anyone out there who has really enjoyed the stock market over the past few months. I mean, just look at the ES below. I don't care what kind of implausible hockey-stick-shaped equity curves might be out there on the web (cough, cough); neither bull nor bear can consistently accumulate profits with whipsaw action like this.

0722-esnowhere 

It's no better on a longer-term scale. How has the Russell 2000 done for the entirety of 2010? Let's take a look:

0722-rutyear

That's right………..zilch.

It seems almost impossible for me to believe that just 18 (very long) months ago, I was racking up extraordinary triple-digit percentage returns for myself. These days, even the greatest hedge fund managers in the nation seem to be struggling to eek out returns that resemble nothing more than passbook-savings rates from the old days. People are satisfied with even just a few percentage points.

It's a huge amount of work for very little reward.

I guess you can sense my frustration. One day everything will line up. The next day it'll all get taken down again. The real stickler right now is that we're in kind of a no-man's land of prices. The index charts themselves are not clearly bullish or bearish. They're just in the middle of a huge morass.

Individual charts are a different story. It seems that these days, I'm getting one or two "blow-ups" a day among my short positions. Yesterday there was CMTL. Today there was NFLX. It looks like tomorrow it's going to be AMZN, which I'm also short.

Indeed, AMZN is down something like 15% after-hours as I'm typing this. That means that tomorrow, in the span of three months, Amazon will have lost one-third of its entire market capitalization! So it seems like the darlings of earlier this year (NetFlix, Amazon, etc.) are getting shellacked.

One thing I will say is that I have avoided, and will continue to avoid, any of the "ultra" ETFs. With this constant up-one-day, down-the-next, over and over again, people hanging on to such instruments are going to get destroyed. I'd rather hold fast to my current short positions, knowing that these are nominal price levels that will not get eroded by the machinations of day-to-day action.

I'm pretty tired of charts right now, so I'm going to call it a day. Someone let me know if we ever have a trending market again. It would be a nice change.

The Euro Risk

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Well, it's not a good day in bear-land! In fact, Beanie's appearance (which is only coincident with big up days on the market) sort of sealed the deal that this was a tard-rally.

The only thing that has me really worried is the Euro. When I first examined its inverted head and shoulders pattern, tinted in yellow below, I watched for a target just above 1.30. It hit that target (circled in blue) and reversed hard.

Of concern now, though, is that more substantial bottoming pattern, which is both the yellow augmented by the cyan (translation for Iggy: blue). This suggests a target of – gasp – 1.3472, which would be bad for the equity bears, to say the least.

We. Shall. See. If the Euro starts to get ragged and turn south, equity bears are going to stomp faces in.

0722-EUR