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Pretty nasty day out there so far for the bears! And my oil-related positions have been taking a drubbing.
My largest one, OIH, is the one I watch most closely. My stop on this is $195, which was the all-time high set back on January 3 of this year.
The risk is that OIH does a repeat of what it did back in 2006 and early 2007. There was a bearish looking pattern (blue tint), a bounce and subsequent drop (the yellow tint), and then an explosion higher to new highs (the magenta tint). I've repeated these tints for the late 2007 to present period. Of course, the magenta period for the present is conjectural at this point, and naturally if it fulfills, I'll be blown out of my OIH puts with a fat loss.
Also in the world of energy, the solars are going bananas. I don't trade these, either long or short, simply because I don't find their charts particularly interesting. But there's no doubt this sector, of which FSLR appears to be the king has made a lot of bulls some money.
The IWM continues its march to the high end of its 2008 range. Somewhat distressing. This is either a fantastic put-buying opportunity or the final set-up before the bulls blast the market higher. Would be nice to know which of those was about to materialize, wouldn't it?
The presumptive next president has already made plain his plans to
substantially increase taxes, including a large increase in capital
gains taxes
The head of the federal reserve has (finally) stated what would have
been unthinkable for him to say a few months ago: that it's likely
we're in a recession
The unemployment figures came out, and joblessness shot higher than
most expected. Payrolls dropped 80,000 people, marking the third
consecutive month of a shrinking job market, and the unemployment rate
leaped to 5.1%
Congress is going to approve plans to plunge the nation hundreds of billions of dollars into the hole to bail out investment banks and low-income borrowers that made foolish financial decisions
Every economic indicator coming out shows that nation's economy is heading downward
……..and with all this, the Dow is up 1,000 points over the past couple of weeks and the GLOBEX is in the green before this morning's opening bell.
It sounds like we've returned to the insane illogic of bull markets past. Maybe GS needs to bring Abby back. The brainlessness has returned (cue Beanie……….).
My expectation, naturally, is that we can resume the party sometime soon. I sure hope so. If we have another big pop like Tuesday, we could be really hosed for a while. At the moment, the market has returned to its complacent recess period, which it seems to do every ten weeks or so. I've highlighted on the $VIX chart below these "time out" periods before we bears can start to have fun again. It's a drag.
The IWM remains tantalizing (or terrifying) close to its resistance line. I'll be sweating this one out at 5:30 a.m. Friday when the employment numbers hit. Of course, now that the market has returned to its bizarre way of embracing horrible news, it's hard to imagine any employment report that would be anything but positive. Citicorp could declare bankruptcy, and its stock would double instantly, given the logic of the market these days. Witness the surge this week on UBS after its $14 billion writeoff.
The Dow 30, likewise, is twiddling around the 12,700 area, waiting for a break in either direction. I am bellying about the market a lot right now, but honestly, if we're still in the midst of a bear market, there is never a better time than now to be gobbling up puts, because in retrospect they will look dirt cheap.
One chart which scares me a bit is the Transports. This has a well-defined inverted head and shoulders pattern. Of course, this pattern isn't exactly at the bottom of a long, multi-year downturn, which would make it exciting for bulls. The pattern is there, yes, but typically these things are explosive after a market's value has been ground down to absurdly cheap levels. In this instance, it may pop, but I doubt it would rise to the 6,000 point level that is suggested by traditional measurement techniques.
Now, a few stocks. I've actually turned bearish on gold. It stinks that the XAU's options are so thinly traded, so I have to stick with stuff like ABX instead, on which I bought puts today.
ACL is enticing. It's got a clean stop at around $155, and a break below that horizontal line at $128 would be sensational.
CEPH is a terrific little graph. The neckline, as I've pointed out before, has a tilt to it, but the stop price couldn't be cleaner.
I got back into ICE today, too (puts, naturally). The $155 stop price is a few bucks off, but I'm willing to be a little early.
As for the investment banks, they still don't know what to do with themselves. I've got puts on JPM's gigantic megaphone pattern. To me, the likelihood of this stock goer lower far exceed its chances of going higher.
Good night, everyone. I'm exhausted……time for some rest!
I'm going to be occupied this morning, so there won't be a post until probably after the close (sorry, you morning post addicts!) I'm typing this a little before the opening bell, and at the moment we seem to be positioned for a nice drop at the open – – good!
Honestly, these charts were starting to worry me, and we need to get some real weakness to break the back of any potential bull setup. A break on the IWM beneath 67.81 would take several nasty down days, but that's pretty key to pushing the bulls back.
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