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I'm hearing a lot of folks toss a phrase around attributed to Joe Granville: "If it's obvious, it's obviously wrong!"
Ummm, I'm not sure how many of you have data on Mr. Granville's performance, but Mark Hulbert noted that The Granville Market Letter "is at the bottom of the Hulbert Financial
Digest's rankings for performance over the past 25 years – having
produced average losses of more than 20 percent per year on an
annualized basis." So I wouldn't go tattooing everything he says on your forehead or anything.
The "obvious" thing these days is the head and shoulders pattern on the S&P. I admit, this thing has been exasperating. Before the market opened on Monday, it seemed ready to fulfill its destiny, but then Ms. Whitney decided to show up.
The above is the /ES, which incorporates the after-hours surge credited to INTC's earnings release. We're at a dangerous zone here. A cross above 928.25 on the /ES would put the final nail in the coffin on this pattern. But until then, I urge you remember a lesson from BRCM in 2000.
At the time, this stock also had a similarly exciting pattern.
Yet it wouldn't seem to break 130 as it "should" have. One day it even went beneath 130 and then climbed right back up again. You can imagine how the bears were going insane with this stock as its freakish second right shoulder was formed.
The point I want to make is that sometimes these topping patterns take longer to play out than we would like. You have to just be patient sometimes. My point is better made with BRCM, though. I've tinted in the (now tiny) pattern which presaged what was to come.
Anyway, I had fallen back in love with the market, but the first couple of days of this week have turned me cold in a big, big hurry. It'll be interesting to see how tomorrow stacks up when it's finally over. As of this moment, it certainly looks like another slam-dunk for the bulls.
P.U. Today stunk (not as bad as yesterday, but still). These options expiration weeks are starting to get quite the reputation!
I'd like to ask for your ideas about something: here at Prophet, I'm going to be putting together a new web site totally dedicated to information about technical analysis and how to use it.
I've got some ideas already about what should go there (all the videos I've done on ProphetCharts, links to good blogs, lists of good books, and so forth), but I'd love to hear your ideas too. If there were a single, free site that housed all sorts of information about charts and their application, what would you like to see there? Thanks for your thoughts!
I normally like buying puts on multi-hundred dollar stocks, but for CAR, I'll make an exception. This stock has gone up 1800% in the past four months, and I'm terribly sorry, but this is not a healthy-looking chart. I've bought up a bunch of January 2010 $7.50 puts. I'm setting my contingent stop at 8.54.
Lately, I had been doing well with overnight profits in big ETF positions. I blew it with TBT, though, because I closed out two big positions yesterday for no good reason. Shame on me!
I wrote up TBT in this post yesterday, and I established two big long positions in two separate accounts. I closed both of them out, both at a profit, but that was just plain stupid. Some folks have expressed concern about TBT in the past, and I let those voices in my head take hold of me instead of coolly following the chart. It's up over 2% today, and I really wish I was still a holder. Hats off to those of you who bought this yesterday and are still long.
When paper money has been in circulation for about 18 months, it is usually too worn-out to be of use, so the Treasury burns it. I'm starting to think the same way about the past four months – – I have made and given back the same wad of cash so many times, I'm expecting the Treasury to request those funds for incineration.
I'm still up quite nicely for the year, but the overall amount of "up" hasn't changed for four months now, since it's just zig-zagged up and down. A day like yesterday can nuke many days of accumulated paper profits very quickly.
But I recall in the Broke movie I watched last night that one of the poker players they interviewed said that what counted was "the method, not the result." (I'm paraphrasing, but that was the idea). The general notion being that if a person loses $1 nine times in a row, and then wins $50 in the tenth instance, it is better than a person who wins $1 nine times in a row and loses $50 in the end, provided that the method being used (in the first case) is consistent. Putting it another way, if you are consistent with a method which provides you an advantage, in the end, you will win, even though waiting to get there can be miserable at times.
Having said all that, I offer DUG, which I think has a good chance of pushing to the tinted area I've highlighted. I remain short OIH, although it's a little painful this morning being so.
A couple of weeks ago, Michael Covel wrote to ask if he could send me the DVD of his movie, Broke. I said yes, and I watched it last night. I really enjoyed it! It's really well made.
For the sake of full disclosure, I'm not being paid anything for my four-word positive review – – and given the nature of this blog, I figure others might want to check it out as well. Here's the trailer, below, and here's the web site for the movie. Good job, Michael!