I am writing this entry on Saturday, July 5th during a very pleasant three-day weekend in Colorado. I do not think I will have an opportunity to do another post until Monday night.
Over the past couple of days, I have spent a lot of time (as you might imagine) thinking about the markets and looking at the charts. The "contrarian-contrarian" viewpoint seems to be going something like this: "Since everything is so bearish (including this weeks' cover story of Barron's), then the obvious contrarian conclusion is that the market is going to bounce. But since so many contarians are so loudly declaring that we're a bounce is inevitable at this point, then we're bound to keep falling, because the market always like to surprise the most people possible."
That kind of thinking – – that is, trying to outguess what everyone on the planet is thinking – – can make you crazy. I prefer to stick to the charts. What the charts are telling me is that we're in for a bounce (and not the kind that lasts for just a few hours). I don't intend to get overly aggressive about this bounce. But I will say that (a) I took a huge portion of my positions either wholly or partly off the table on Friday, including all my index puts; (b) I went long a number of bullish ETF funds (the double-correlated kind); (c) I intend to make select long equity purchases on Monday, barring a surprise.
One index chart that seems terribly ripe for at least a few days of an upturn is the $XBD:
Looking at the $INDU, its price has the Bollinger Band distorted very badly, and I think a list of about 700 points higher from here would bring a lot of needed relief to the market (and a new opportunity for the author and readers of this blog to reload).
The Transports, too, look ready to get back to about 5,100; a drop in crude prices, which I strongly suspect will happen, will provide an impetus for such a climb.
My target for the retracement on the $MSH is about $580.
As for OIH, this fell nicely on Wednesday and Thursday, and I can easily see this getting to below $200 this week.
To see just how badly banking is battered (there's your alliteration for the day…….), look at this chart going back a dozen years. We are, at these levels, at depths not plunged since the nadir of the currency crisis of 1998, and we are well below even the most gruesome months of the 2000-2002 bear market.
I read somewhere that GM was at the lowest levels for its stock since 1954. I'm not sure where they are getting that price data, but it's not really accurate, as you can see below. In any case, if you had bought GM when Lyndon Johnson was present, you would (even assuming 0% infllation for 40 years) still be in the red. Isn't that amazing?
The Russell generated fantastic profits for me last week. Obviously, a climb back to anywhere above $700 would make this a very enticing short. Until then, I shall either do nothing or dabble with intraday (not overnight!) call positions.
The S&P 100 got close enough to its Fibonacci retracement for my satisfaction.
And the S&P 500 touched it nicely, creating what might be a firm triple bottom. If, later this year, the market resumes its downward trajectory, a break below these levels will be devastating for the bulls.
Here's a different view of the same index with similar conclusions.
The Midcap also touched its retracement nicely, and a climb to about $845 seems to be called for.
I still have plenty of puts, but they are almost all in the energy or agriculture sector. Here are a few favorites……..
I've been pretty repetitive about ICE, but I'm just crazy about this one.
I am counting on a drop in gold, and my short in ABX is my favorite one there.
EOG pierced its necklined beautfully on Thursday.
Honeywell's breakdown under its consolidation range makes for another nice short.
And another one of my "dainty little H&S" patterns is NIHD.
After such a dynamite time lately, I am putting on my Cautious & Humble hat, because after a load of profits, it's easy to screw up. I have no intention of repeating the mid-March through mid-May fiasco. I have reduced my risk substantially, and I intend to play what I see as a firm likelihood of a bounce conservatively.
Once again, I probably won't be able to do a new post until late night Monday, although I'll probably pop into the comments section now and then. Thanks for coming by, as always!
