The government released its advance estimate of GDP in the 2nd quarter, and it came in rather light – – – plus unemployment seemed to bump up, thus causing the market to take a nice 200+ point tumble on the Dow today. What was interesting wasn't so much the estimated Q2 2008 figures, but the fact that the U.S. government revised the past several years – all downward! – since they somehow magically discovered their earlier pronouncements were too high. Indeed, Q4 2007 – which, let's face it, was some time ago – went from a positive number to a negative one. Thus, the commerce department actually managed to confess that the economy is indeed shrinking. Big freakin' surprise.
There seems to be a widely-held notion (particularly by the likes of Cramer) that energy and indexes are inversely related. In other words, if oil can only manage to go down, then it's going to be a party for equities. This simply isn't the case. Witness yesterday when energy went up and indexes went up too – – or today when they both went down. More broadly speaking, I am positioning my portfolio for a substantial drop in both energy and indexes. Cheapening oil is going to be a symptom of a weak economy……….not its salvation.
The Russell, which is where my index puts are focused, wasn't as weak as the Dow today, but it did lost six tenths of a percent. I am setting my stop-loss very tight, at yesterday's high, since I don't want to get caught up in a surge just in case the S&P does indeed find its way up to 1325.
Speaking of the S&P, it fell more than twice as much as the Russell. The boldface retracement you see here remains my "line in the sand" for this particular market.
Now that July is behind us, I thought I'd take a look at the year to date performance of the big indexes so far. The Dow is a big loser, having fallen over 12.5%.
The $NDX is down about 10%, having been breakeven back in late May.
And the Russell is down merely 5%, having actually been positive in late May. Even on a percentage graph, you can plainly see the head and shoulders pattern I am playing (which spans May into part of June).
I remain cautiously bearish on banks, both commercial and investment. Wells Fargo is one example, although I have no position in it now.
And Bank of America is another, in which I do have a big position, since it's a cleaner chart.
First Solar's explosive earnings after the close yesterday propelled this stock twenty dollars higher earlier today; it ended up three – count 'em – three shiny pennies. This failure of a bullish breakout is encouraging for this put-holder.
Late yesterday would have been a good time to re-enter some energy shorts. HES did a nice retracement.
And OI sported a very impressive 12%+ tumble.
I re-entered my Priceline position today as well; it could go a little higher, but the horizontal line you see below is my stop-loss, so the risk is pretty small.
I tripped across some stills from a 1975 IBM Presentation. It's pretty awesome. If you want to check it out, click away.
