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Monday, April 23, 2007

Finally!

At long last, the Dow did not go up today. A one-day respite, at least, from the torture!

A lot of people are responding to the poll I posted earlier today. For those that haven't responded yet, please do so.......

Should this blog allow anonymous posters or require registration?


What's the one thing you'd like to see that would improve this blog?


What kind of trader are you?


Thank you. I've been watching the results accumulate today, and it's very informative.

All eyes have been on Asia, particularly since the 2/27 blowout. People are wondering when the mania is going to end. God only knows, and He ain't telling. Here's a graph of Malaysia. I mean, these aren't magical fairylands, people. Have you been to Malaysia? I have. I think it's a hole, myself. But then again, I'm an Ugly American.


Even though we haven't crossed the fabled 13,000 mark on the Dow, the press is already impatiently looking for the next big milestone. ''We could be looking at 14,000 by the end of the year,'' said Robert Froehlich, chief investment strategist for DWS Scudder. Yeah, fine. Whatever.

Anyway, the S&P had a touch of weakness today, but notice how it stayed perfectly above its former resistance level. In other words, now that line represents support.



The Morgan Stanley Tech Index looks like it could fall badly, but unfortunately, the spread between the bid/ask on these options is wider than Rosie O'Donnell's underwear. (I wonder to myself just how long people will pause before clicking that link.)


A couple of cautionary tales for you. First - - - American Airlines (AMR) appears to be a lovely head and shoulders pattern.


But look at Continental Airlines (CAL), which I was mentioning as a short for the same reason a few weeks ago. It pushed above its neckline twice. And then - finally - started to fall. All I can say is that, because of this, AMR doesn't' excite me as much as it might, and this serves as a reminder of the importance of stops.


Another cautionary tale. The stock ONT looks like a honey of a buy. I've mentioned this before. Great volume. Great price action. All the right moves.


Let's look back a few years, though. A similar situation with the same stock. Let's presume you jumped in and bought a bunch of this.


What happened next? The technical term is that the stock farted around for years to come. In fact, the aforementioned farting was down at a substantially lower price. So although the burst above the saucer was great for those who got in early (and got out), it wasn't so hot for the buy-and-holders. And that's not because the market was bad in general. On the contrary, the market was very strong.


Capital One (COF), which I mentioned as a short countless times earlier this year, continues to fall.


Lehman Brothers (LEH) has a fascinating interaction with those Fibonacci fans. Investment banks have had huge runs up (yes, yes, I got blown out of GS) but this is worth watching.


As for Southern Copper (PCU), I think one glance at this channel would suggest that, no matter what your viewpoint on the stock, we're certainly at the northern end of this channel.


Check out Potash Corp (POT). That's quite a shooting star, yes? A short on this with a stop price just above the high today may pay off nicely.


Finally, Schnitzer (SCHN) continues to act bullishly. I'm including its former breakout from years ago to indicate what a handsome move this stock has made in the past from a similar breakout.


I'll post the results of the poll tomorrow and indicate what, if any, changes I'll be making to this blog based on your input. Thank you!

at 4/23/2007 107 insightful comments   Links to this post

Labels: $msh, $spx, cof, leh, schn

What Do You Want?

Given the barroom brawls that frequently break out in the comments section (with more than a few broken beer bottles thrown directly at your humble narrator), I decided it was time to embrace democracy and let the readers of this poll take about 15 seconds out of their busy day and state how to improve this blog.

The first question is the most important to me - whether or not people want anonymous posters or not (that is, to allow anonymous people to post in the comment section). The advantage of allowing anonymous postings is you get a more active comment section, and most of the anonymous posters are worthwhile. The disadvantage is that you get a few bad apples that try to ruin it for everyone. I'd like to know what you think:


Next, I'd like your opinion as to how you'd like to see this blog improved. I've put in a few suggested answers, but you can also type in a free-form answer of your own.


Lastly, I'd be interested to know how you characterize yourself as a trader. I confess to being a bear - - it's the cross I carry. How about you? A bear? A bull? Or do you claim to be what everyone should be, which is agnostic? Be honest, now...

at 4/23/2007 31 insightful comments   Links to this post

Friday, April 20, 2007

Topless

What more can I say? The market is on turbocharged boosters right now. Bad news doesn't stop it. And Lord knows that good news isn't going to stop it. Crossing the fabled 13,000 mark next week seems to be virtually a foregone conclusion.

Looking at the SPY (S&P 500 ETF) below, you can see the entire bear market of 2000-2002 has been rendered moot, and we are way up to lifetime highs. And this is nothing compared to the likes of the MDY.


I think I've personally had just about enough of the "top calling" business. As you may have noticed, I'm just taking it one day at a time. Let me illustrate how hazardous top calling can be.

Take a look at the graph below. Let's put ourselves in a bearish mindset and, observing the rapid, relentless explosion higher of equity prices, assume that the tide is going to turn. Or at least things are going to rest for a while.


Look what happened next. It slowed down, but it didn't stop going up. Buying kept feeding on itself.


Now the market accelerates yet again. The bears have been wiped out. All the bulls are zillionaires. And bets start taking place as to when the NASDAQ when overtake the Dow in terms of point value (Remember that?) So the bears completely throw in the towel.


After a few months of a soft market, the bulls could just as easily look at the graph below and figure that the market's done taking a breather, and it's time to push higher again. It's very easy to imagine the sentiment. After all, it looks like the "shake out" is through, observing this graph.


And we all know what happened next. And I've marked each of these points on the chart below. The bears were dead wrong all the way up. And the bulls were dead wrong on the way down. And yet we can see (if you try to be objective) why the bulls or bears were completely rational in their conjecture at the time of these graphs.


So is it hopeless? After the past two months, I'm starting to think so. It's very demoralizing to be analytical, rational, and careful, and yet be so wrong. And it doesn't exactly help that my free contribution of thoughts yields mud-slinging yuk yuks from the bulls who frequent this board.

One item that actually turned out as predicted was Capital One (COF). In spite of today's massive market rise, it was quite weak.


A few stocks had great earnings, opened way higher, and yet sported a pretty large bearish engulfing pattern. McDonald's (MCD) is - excuse the pun - a whopper.


I'm glad this week is over. All this bullishness is stomach-churning. Maybe we're just at point "A" of the graph shown at the top of this post. But so many stocks have gone stratospheric, it continues to be hard to believe.

at 4/20/2007 92 insightful comments   Links to this post

Labels: cof, mcd, new highs

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