Oh, Lawdy, Lawdy. I went to bed at 2:45 a.m. Wednesday morning, having packed for hours. I had to get up at 4:00 a.m. to get ready for the trip. Off the plane goes at 6 a.m. Change planes in Salt Lake City. Arrive here in Baltimore. And it's past midnight, and I'm still up, looking at charts. Gawd. (Update: Errr, I collapsed in a heap at 12:30 and got up at 6:30 to resume……..sorry!)
During the aforementioned layover, I was pleased to see the Dow was down 95 when I got off the plane. Soon after, it was down 125. When I got back on the plane, it was down only 65. I had, during the layout, tightened up stops and trimmed index puts a little. But I'm glad I didn't get too aggressive with tightening stops. The action today was spastic, and I was relieved when I finally landed (after the market had closed) to see the Dow was down over 130. The chart of the $NDX below shows how, in the course of one day, the market was just all over the place. It looks like one of those contrived wall charts you see drawn as background in one-panel cartoons.
I'm starting to get a little cautious in my immediate-term bearishness based on the Dow approaching the rising trendline you see below, which indicates the higher lows that have been established through the course of 2008. I'd feel a lot more comfortable seeing this trendline broken. We're very close to it now, which could mean another bounce.
The $COMPQ is more clear, with a relatively clean path down for about another 100 points (barring any general market strength!) The 2325 level seems to be the next logical resting place.
As for the more narrow $NDX, provided we stay below 2,000, I'm comfortably bearish.
The Russell 2000 has a bit of support at the dotted red line you see drawn around $718. We'll need to break that in order to have some downward momentum. I'd say doing so would clear a path to about the $670 level.
Adding to my cautiousness is the $OEX, which is approaching a big Fibonacci retracement level. The move from 660 to about 600 may be all this has to offer in the medium-term.
I like the pattern AAPL is carving out, with a retracement to a major trendline completed and a dainty series of lower lows and lower highs over the past six weeks. My target here is around $161.
CAT is looked good, too, having failed to complete a bullish breakout in May and now slipping away from its 2008 trendline, drawn in red here.
Coach has been a favorite short position of mine, and it will get to be even more favorite if it pushes past the green trendline shown below. That would be a pretty important break.
I'm an idiot for having puts in ACI. Trying to guess when a momentum stock has topped out is lunacy. Shame on me. I bet I get stopped out of this one today.
I'm less of an idiot for my CEG short position, which has a major broken trendline and general downward movement for the past seven months in its favor.
One of the most valuable lessons I've learned from the readers of this blog is to stay short on weak securities (sounds obvious, but I have always had such a penchant for trying to bring down crazy momentum players, this is somewhat of a revelation). The fact is that battered issues tend to get more battered, and I'm experiencing that with SHLD. I am simply going to keep hanging onto this.
On Tuesday I pointed out the broadening top in VMI. The next day, this stock really had the air taken out of it.
Here's a fine example of a change in fortune. Take a look at ANR below; this graph ends at the beginning of 2007, and you can see what a dog this stock was. Now click on the "Present" tab. Incredibly, isn't it? About a 900% rise in less than 18 months. When will the wind be taken out of ANR's sails? I'm weary of guessing.
Here's another nice example………AIG. In the graph below you can see AIG broken a trendline (and it's a huge one, spanning back to when Richard Nixon was in office). The prices struggled back to the trendline, but the damage was done. Now click on the "Present" tab to see what's happened since then.
OK, I'm on a roll here; let's do another fun example. BORL, shown below, was clearly a fantastic winning stock. The bulls loved it, and wish good reason. You can see an "ANR-like" climb, as this company was seriously considered a threat to Microsoft's dominance in the microcomputer software field. Now click on "Present". How the mighty have fallen, eh? It's pretty sad.
I had taken profits on AZO a little while ago, and I'm sorry that I did. The (crude) diamond pattern in this stock seems to be fulfilling, and the price breaks beneath support.
One stock that was frustrating people with its slow movement was COF. This seems to be changing. COF had been, for about 7 months, bouncing between about $57 (on the high side) and a series of "higher lows" on the low side. But this trendline, shown below, was broken last month, and the damage is clearly done. Bears are finally getting their day on COF.
In May, I pointed out what looked like a nice little H&S pattern on LNN. This pattern was never really completed, though, and there's little more dangerous than a failed pattern, so I got out at once. The stock pushed higher. On Tuesday I was toying with the idea of shorting it, but shorting based on the conjecture of a double top is often dangerous, because there's very little to keep a stock from rendering the double top moot by having simply one more good day. In any event, a short here would have played out nicely, as the stock got zapped hard. Ah, well. This is something my charts wouldn't have been very good at predicting.
I will be out and about all day long, and I'll do a post tonight. I'm sorry for anyone that waited for this post last night. Have a good trading day!
