I got an email today from a person wondering if technical analysis was a self-fulfilling prophecy. In other words, if everyone is following the same chart, won't the action of the market simply be dictated by people taking action based on the same lines, indicators, and levels?

This is a question I've heard before, and my response is something along the lines of the Drake equation. Specifically:

P=Number of participants in the equities markets

A=Percentage of participants with an awareness of technical analysis

K=Portion of those aware of technical analysis that have accumulated a knowledge of it

E=Proportion of knowledgeable technicians whom effectively apply its methods

Thus, P x A x K x E=probably about 7 people, and that includes you.

Seriously, though, my belief is that the quantity of those people who use technical analysis effectively in their own trading represent a very, very small amount of the collective buying power in the market (let's call it 1%, and I'm probably being kind), so I think the notion of TA being a self-fulfilling prophecy is incorrect.

During times like this, it's important to think back to former high-fliers like POT and MOS. Remember those? There was a time that fertilizer stocks (of all things) were the hottest game in town.

You can click on the "Present" bar to see how things have changed.

My point is that as we're witnessing insanity in stocks like AZO, CAKE, DRI, EAT, and all the rest of them, all these momentum plays eventually meet their doom. The hard part, of course, is knowing when that doom arrives! Because a stock that has moved from $3 to $30 may seem ridiculous, but it could be just as ridiculous as $300 before it has topped out. Tilting at windmills can get extremely expensive.

There are enough patterns with safe, clear stops to provide opportunities for shorting. The past seven weeks have been very, very rough for the bears. There are a handful of stocks I still like on the long side, but on the whole each lunge higher is just making me more skeptical about the market's ability to hold itself up.

You know people are reaching for straws when they are bidding up shares of Ford (F). I'm shorting this today (I've never traded Ford in either direction in my life………..) with a stop at 5.49

I've pretty much given up hope on the head and shoulders pattern. As I'm typing this, it is being threatened to within an inch of its life, and in my experience, when things are this close to getting violated, it's pretty much a lost cause. Charts don't typically creep up to a hundredth-point of their "violation point" and then suddenly give up the ghost.

I only entered my precious metals trades (GDX, GLD, SLV) and commodity trade (DBC) on Wednesday, but I am taking profits on these. The gains have been very good, but I'm a little uncomfortable at these levels holding on, given the substantial amount of overhead resistance.