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Thursday, May 10, 2007

This Sad Burlesque

Many years ago, when I worked at investment bank Montgomery Securities, there was this technical engineer named Bob that dealt with phones, computers, and communications equipment. Since I worked in a technical part of the company, we saw him quite a bit. My boss couldn't stand him, and he referred to him as "Bob from Hell" (since there was more than one Bob in the business, as you might guess).

The main reason for his distaste for Bob was that Bob always had some lame-ass answer why something wasn't working. One time took the cake, however. I was at a remote location, and we had set up some 14.4 modems (this was 16 years ago, remember). The connection was having serious trouble, and we asked Bob what the problem was. "Well, it's raining outside" - - he said this with a straight face. He was hoping, I suppose, that we would believe him and stop pestering him about the issue, since we couldn't do anything about the rain.

I was reminded of this today by the extremely weak retail sales figures that came out. Since the entire earth - and God knows, the financial media - is overrun by bulls, they had to come up with some lame-ass explanation. Their excuse? They took a page from the Book of Bob........

OK, different subject. Ken Fisher. Now, you've probably heard of Ken Fisher, since he advertises just about everywhere that there is financial information. He is a very well-known investment adviser whose company (cleverly named Fisher Investments) is just a few miles from where I'm sitting right now. His claim to fame is the column he writes on a regular basis for Forbes.

Now, let me preface this by saying that Mr. Fisher is a sharp fellow. His market observations are sensible and usually pan out quite well over time. However, he definitely has a lot more bull blood running through him than bear, and this can sometimes weigh heavily on how he views things.

Let me give you specifics. Take a look at the chart below, and take note of the seven numeric demarcations I've laid out.

Now follow along with me, boys 'n' girls, as we read the essence of his market disposition during each of these seven instances. I have provided hyperlinks to each Forbes column.

1 - posted on10/18/1999. "Remain 100% in equities"

2 - posted on2/7/2000. "While still 100% equity...60% in Europe and Japan..40% in the U.S."

3 - posted3/6/2000.

"I forecast a flat S&P in 2000"

4 - posted3/19/2001.

"I'm outright bearish for the first time in a decade". (Editor's note: the market actually rose 10% in just a few weeks after his column, although generally speaking he was right, albeit a year late in declaring the bear was here.)

5 - posted9/6/2002. Described U.S. stocks as "a beautiful market" - he nailed this one, absolutely.

6 - posted12/8/2003. Predicted it would be "a three-year bull market". He was right, but, umm, aren't those three years over now?

7 - posted5/7/2007. This inevitable "it's different this time" posting.......Ken declares simply to "Buy good stocks and enjoy the ride".

What do we conclude? I dunno. Maybe that if a bear market does start, Ken will let us know about it a year or so later. Until then, it's buy, buy, buy.

Now, today was a good day.......down a meaty triple digits (for the first time in nearly two months - it's about f*cking time). But a concern I have going into tomorrow (which is a critical day, which both Retail and Inflation reports coming out an hour before the open) is the graph below. Will the $RUT bounce off the trendline I've drawn? Or break it? Those economic indicators will absolutely dictate that.

More than one person has scolded me for not showing some Fibonacci extensions on the markets. Well, let me give it a shot, although I'm not sure how helpful these are. First, here's the Dow 30. According to the extension displayed, we've got a ways to go - the next Fib level is at 14,563, well over 1,000 Dow points above the current level.

Yet if you look at the Russell 2000, we passed that extension a long time ago. I've shaded in the entire area above this extension. I can't really drawn any conclusions from this. I love Fibs for the "in between" bounces, but I'm not so sure how germane these extensions are for these markets.

As for the NASDAQ, it obviously weakened substantially today, pushing away from that major resistance line.

And the $SPX is still above its former resistance line, although technical indicators are definitely giving off sell signals.

I don't typically follow DNDN, but this is a pretty fascinating graph. Just look at all the shares trading hands (on ungodly volume) - - first a massive gap up, then a massive gap down. Can you imagine the zillions of dollars of paper losses holders of this stock have due to that mania? I guess Jim Cramer was vindicated in the end.

Finally, LGBT got walloped today. Again, I don't normally follow this stock, but the graph is cool. It's particularly unusual since its ticker symbol stands for Lesbian Gay Bisexual Transgender, surely the only ticker with such an interesting basis. I know nothing about the site itself, but maybe ericbolling or NewEquity can help us out.

Ladies and Gentlemen: the Blue Man Group:

 

at5/10/200728 insightful comments 

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Wednesday, May 09, 2007

Spasm

Today's post will be relatively lame, unlikeyesterday's really long and cool post. Read it if you haven't already.

In typical fashion, the market did a total spasm when the Fed did their announcement today. First the market fell hard. Then went up. Then fell down. then finally went up again, staying there, and closing up to yet another record high (rolling eyes).

There are a few interesting charts that are busting into new highs off of pretty bullish patterns. One of them is BBD.

Another, with a similar pattern, is Carpenter (CRS):

I'm going to give Sotheby's (BID) another try on the short side.

The market's just going to keep rising until it stops, folks. Nothing more to it. It'll be interesting to see how Friday goes, since there are some key retail figures coming out.

at5/09/200725 insightful comments 

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Tuesday, May 08, 2007

I'm Turning Japanese

I bet you never thought you'd associateDevo with technical analysis, but check out their song "Patterns":

Patterns all around you

patterns everywhere

patterns of behavior

sometimes seem unfair

can you recognize the patterns that you find?

Patterns unfamiliar

patterns lead you through to

patterns of discovery

tracing out the clues

can you recognize the patterns that you find?

stuck in your mind

In this land where stability is hard to find

you can rearrange the patterns so unkind

don't bother asking why a pattern never cries

old patterns never die they just go on and on

Patterns multiplying

re-direct our view

endless variations

make it all seem new

Cool, huh?

I read an interesting article aboutRichard Russell throwing in the towel. He has been a bear for lo these many years. Now, at long last, he's saying it's bull market time. Draw your own conclusions.

Oh, and don't forget tosign the petition to keep Paris out of jail. As the petition declares, "...She provides beauty and excitement to our otherwise mundane lives." God knows that I'm grateful that an illiterate, insipid member of the lucky sperm club gives me a reason to wake up in the morning. I only pray that they don't do a reality show of her incarceration.

One of the readers, Keith Shepherd, mentionedthis interesting article about the similarities between the "melt-up" in the Dow recently with the Nikkei back in the final weeks of 1989. Whenever I read that the current market resembles a certain period of the past, I check it out, and usually the graphs don't really match.

Because I adore my blog readers - well, most of them, anyway - I made the effort to fire up Photoshop and blend the recent history of the Dow 30 with the Nikkei 225 during the last portion of 1989. Even I was surprised at the results. They are virtually a perfect match, right down to thedoji hanging man pattern created today.

Let's back up some. Take a look at the Nikkei through the 1970s and 1980s. An amazing, incredible, "let's all learn to speak Japanese" (remember that?) kind of market. People were freaked out, and the Japanese were snapping up the Empire State Building, Pebble Beach, and everything else in sight.

Looking closer, you can see that practically every day was an up day. Now let me ask you - - and I'm directing this at the bulls. Where was the warning sign? Where did it show a top was in place? How could you tell that this was the end? Imagine you were massively long this market. How would you know the party was over?

I don't need to tell you what happened next.

Let's take another, smaller example - Malaysia. This little country had a great run-up in their share prices.

But notice what happened after the melt-up. Things went to hell in a handbasket. (I sold short a bunch of EWM today, with a stop at 12.11).

OK, back to the present. DRQ represents a potential buy. In this kind of market, I'm really reluctant to go long, but if you must, this is worth checking out.

I would say the same thing (with similar warnings) for former shining star JetBlue (JBLU), which seems to be in the process of forming a series of higher highs and higher lows, having suffered terribly over the past year.

Oh, and MicroStrategy (MSTR), mentioned on this page many times recently as a short candidate, finally paid the piper. I've marked the failed bullish breakout earlier this year which preceded this nasty tumble.

Your video entertainment today combines two of my favorite cultural touchstones: Star Trek and Monty Python and the Holy Grail. The few moments with Captain Pike is alone worth your time.

 

at5/08/200725 insightful comments 

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