066

Wednesday, November 01, 2006

333

OK, I'm starting to enjoy the market again. Four down days in a row. Granted, only two of them were worth anything (today and last Friday), but I'll take what I can get. Red on the screen, and I'm a happy guy.

Today was actually my second-best day ever in percentage terms, and it wasn't even down that dramatically. It's finally becoming clear to the public that the economy is faltering. Bring on some more of that! I guess I'll only regret it when I try (again) to sell my second house here in Palo Alto, The market has become mushy around here, and I gave up selling it a few months ago. I was going to try again in spring, but if things keep going this way, I may wind up as a landlord far longer than I ever intended.

Many months ago I suggested ESRX as a short. It's worked out nicely. It never violated the stop price I suggested, and those owning puts have made out like bandits.

The NASDAQ is looking particularly squishy these days, which is terrific. Take a gander:

Similar action is on the $NDX. You can see a nice progression of lower highs here, and today's downdraft was a monster bearish engulfing pattern.

Also take note of just how quickly the air has come out of the S&P's RSI indicator. It's fallen from nosebleed levels to well under the important 70 line. Let's keep beating the spirit out of these bulls, guys 'n' gals. Shake them and break them.

I loaded up on $XAU puts early today, when it was high. It closed pretty much unchanged. This isn't a clean head and shoulders pattern per se, but it's got the markings of one. I like it.

The Fib Fans on ADSK are charming, to me, and it's got a nice, clean stop. Ummm, keep in mind that tight stops can get ignored by giant gaps up, such as I experienced with Cigna (CI) today. It basically opened at its high and fell the rest of the day. Grumble. But I digress.

I've been holding AGN puts for a while. Nice one.

For those wanting to take advantage of the sky-high REIT market, may I direct your attention to ARE?

ATI looks to have put in a lovely double top.

Capital One (COF), mentioned here on numerous occasions, is behaving like a good boy should.

NOV is a nice play on the OIH drop.

Finally, someone mentioned US Steel (X). I bought puts on this a couple of days back. I like what I see here.

In closing, I just want to say thank-you for the thank-yous. There are a lot of nice notes in the comments section, and believe me, I don't do this blog for the money (averting eyes....) I do it for the love! So I appreciate the nice words.

Tuesday, October 31, 2006

Trick......or Treat?

What a roller coaster of a day. I thought we bears were going to get a real treat (Dow was down over 50 points) but it turned out to be more of a trick (market went positive before the close, and finally settled down only 11 points). Here's a line chart of the action over the past few days on the Dow. Totally direction-free. What a mess.

I continue to tout the Russell 2000 as a good place to own puts if you think the market is going to fall. It's got a super-clean stop price too. Puts on this aren't heavily traded, but the bid/ask spread isn't too godawful.

The Transports are looking ready to begin a fresh descent. I like this progression of lower lows and lower highs. A clear tumble here would spook all the Dow Theorists pretty badly.

Bear Stearns (BSC) isn't in any textbook bearish pattern, but the puts on these will have a lot of juice if the steam ever starts to come out of this stock. It is high enough to make this a relatively low-risk/high reward trade.

A more conservative trade would be along the lines of Cigna (CI). I would buy puts many months in the future on this one, since a gigantic insurance stock isn't going to be horribly volatile.

Earnings season isn't providing the kind of clarity/direction I was hoping. Bulls and bears are both losing their minds in this market. So we wait.

Monday, October 30, 2006

Tasty Shorts

The market didn't do too much of anything today. Oil (and therefore OIH) softened up a tad, which is consistent with my speculation that the energy market is going to resume its downward movement. Gold, in spite of the metal's rise in price, softened too on the $XAU. The Dow just lost a handful of points. At least we didn't have some big 'recovery' day after Friday's nice drop.

I just wanted to share a few charts on which I own puts right now. Here's AMG. This pattern is basically in a "post-broken trendline" situation, which is a favorite of mine. The general uptrend has been clearly broken, and the stock has recovered partly or fully to the underside of the trendline. These often represent low risk/high reward trades. Let's call this kind of pattern PBT for the sake of today's entry.

LEN is just a nice topping formation:

NDAQ looks pooped:

TXT is another "PBT":

I've mentioned MRO a few times already:

Altria (MO), yet another "PBT", which seems kind of common these days:

The VIX went up some time, which is also consistent with my view that we've bottomed out on volatility and complacency. The market misbehaved badly in September and October (typically bearish months, yet the market went up) so let's hope the typically bullish months of November and December likewise confuse everyone! We bears could use a break. A sustained break.