Can Money Buy Happiness?

"Well, the answer is it can, but it takes a lot. "

--Dr. David Blanchflower, Dartmouth College
Sunday, Feb. 12, 2006 in an interview with James Reese on RadioEconomics.com.

How about that real estate bust goin' down? I'm reading more and more articles about developers pulling out of projects, mounting new home inventories, and falling prices. Is this a good time to become a landlord in my area? And what about all those houses built with immigrant labor in a hurry? How's the quality going to be a few years down the road?

I think this week will be a moment of truth for the markets. After last week's rally, will we see a full turnaround this week? I'm still bearish, myself.

The Current Index Picture; for reference

Dow Jones Industrial Average

30-yr Bond

S&P 500

Gold Bug Index

Dow Jones Utilities Index

Stocks for Tuesday

Here's the StockCharts.com charts that I promised. They might get cleaner in time, but here's first the updated S&P 500 chart, demonstrating my theory on the Inverse Head & Shoulder's coming up. Notice it's still within bounds



Next, is the Gold & Silver Index. I've outlined the normal Head & Shoulders that I see. I suppose it makes sense that it's moving opposite stocks, since Gold is a defence to falling stock prices.



Here's the sum of the stuff from yesterday. ACO & ERTH stayed within bounds, and aren't going anywhere spectacular for tomorrow.





SCON & REY blew out my first upper resistance lines, but have defined new levels that could also work. SCON might go down tomorrow, but REY should be approached with a new tactic, watching the RSI for reversal, and then short.





Here's the new market movers:



PGH just hit a lower support of $21.85. This should indicate it's time to go long.

Edgy Gets Technical; Stocks to watch for Monday

After reading up some more Technical Analysis (TA), I've attempted to put some line drawing to my charts. My first stop is at my old friend, the S&P 500. I hear some Technicians use two data points to draw their lines, while others use three. I suppose either will work, but three will allow for a greater confidence level. Here's the S&P 500 chart:

I've identified a possible channel, with more recent direction headed down. All these lines indicate that we should see brighter days after another week. Especially when this most recent data looks a bit like an inverted Head & Shoulders patter. The Pennant in the middle of the head might have broken up the pattern, I don't know. But I'll be watching for a breakout in gains if it crosses that sharply decreasing line at the end. Otherwise, it could fall through the support line and down we go.

S&P 500

Next is the Gold & Silver Index. This looks like a VERY prominent Head & Shoulders pattern finishing up! If this is true, expect to see the price of gold falling within a week or two.

XAU


Next, I looked at the market movers from Friday. A few caught my eye for charting, and then I weeded a few more out to mention here. First is SCON:

SCON


The lower line of the channel seems like a bit of a stretch since I don't feel too confident on the data points that created it. However, there are many data points to provide the upper resistance-line. According to this chart, SCON should not move above about $1.66 on Monday. However, this also looks like another possible inverted Head & Shoulders, albeit stretched out and slanted. If so, and SCON breaks above $1.66 tomorrow, it may be possible that it will keep on trucking up for a while, into a new trading range and/or pattern.

SCON probably has enough momentum to break through the resistance line right now. But the fighting between Israel and Lebanon is still hot & heavy, and now the UN is planning on sending in troops along the border when things settle down. That means more countries will be involved in this battle, and that should shake up the markets on Monday.

There's also REY. According to this resistance line, REY shouldn't move above about $32.11 Monday. But my experience has shown me that there are typically two more days of reduced-momentum up-days before this stock 'should' peter-out and drop. But with the bad news abroad, who know how people will feel after this weekend? It might just turn right around and go down. However, this stock looks good for the longer term. It's just at its resistance level and needs to cool off for a week or two. I'll be watching it to see how it pans out.

REY


This is ERTH. There is a strong resistance line at $2.30, and another, weaker one at $2.25. The lower support is possibly out of context, but indicates that the price should drop when the triangle closes. I could have also drawn a lower support line starting right AFTER the first jump in price found in the middle of the chart. This would show a widening channel, or a megaphone, which is also a bad sign for the price. My guess is this stock will repeat the behavior of the previous price jump, and bounce its way back down.

ERTH



Finally, ACO. This seems to have a strong channel boundary, which indicates the price will most likely go up Monday, and shouldn't drop below $18.38 throughout the day. However, ACO closed pretty close to the channel midrange of a downward trend. This stock has a wide field to travel Monday, so it could really go anywhere. Normally, I might go long this stock after a drop like Friday's, but it may be best to just watch it a few more days to determine where it lies in the channel.

ACO


I'll see about making further charts using StockCharts.com, dressed up with more details on the chart itself. Until next time!

Recession or Lull?

All the gains from the bounce are about gone, and we're back on track to more down-days. Although I hear murmurings of 'recession' now, I wouldn't go that far. I'm just watching the markets and seeing short-term negativity. Of course, I'm only looking short-term.

I suspect that the fighting in Isreal & Lebannon has upstaged the Fed Watch, as Treasuries are finally moving independent of the Fed Rate. I've got some Bonds at 4.9% (darn commisions!), so I say, "bring on the recession fears!". Fear of recession will raise my bond prices so I can eventually sell those and move back into equities. I've begun dabbling in day-trading and learning that I should maybe hold onto my shorts just a tad longer.

Isreal is building troops, and are expected to move into Lebannon this weekend, possibly tonight. At least it will happen while the markets are closed, so that we'll have a day or two for it all to begin before the Wall Street panic ensues. Here's to holding onto my shorts!

Bounce over already?

I thought today would be a slightly up day instead of the down day it became. We had some up time in the morning, but now we appear to be back on track with the downward spiral the markets have been following. Yesterday's correction was the result of an oversold condition from the previous 3 days. But today's behavior implies that yesterday's correction may have been overdone as well.

Frankly, I think it all points to the common signals these days that investors/traders are very jittery in all markets, countries, and currencies. People aren't letting gains & losses spread too far before they take their money back off the table. I have no idea which way the market might go tomorrow, although I'm suspecting a down day. The indicators that I watch remind me of the instruments on an aircraft panel: they're more accurate when you're cruising. But when you start changing directions, or you're decending slowly in a nose-high attitude (like when you're landing), the instruments get less accurate as the air flow is no longer flowing smoothly into the pitot tube.

Right now, I feel like the market pulled up a little too hard and is going through a bit of a "stall". And the only way to recover from a stall is to get the nose back down...

I'm short across the board: KEA, VOL, LCRD, & MAT. I've been waiting 3 days to short MAT, but it looks like I should have waited only 2 since I couldn't watch it all day. I might drop the VOL in exchange for one or some of the recent movers: AVCI, RIMG (go short), & MOGN (go long).

BERYL: My house is in Florida, my job is in Connecticut. I can't get away from these hurricanes! But I'd rather be here than on the West Coast. Nothing personal, East Coast is just home.

Update, Thursday's watch list

BCGI and KEA have reversed their downward trends today with massive gains. Relative Strength for BCGI is reaching its limits, and KEA might have another 3-5 days before it begins to correct.

RSI is only one indicator I'm looking at, but all the indicators point to some loser-stocks getting seriously overbought. Actually, BCGI looks like it's forming one of those 'cup & handle' patterns.

If I can do this right, I might gain back all that money I spent learning about options with UNH.

About charts and TA, Cramer had an excellent quote today for all us chart & TA learners out there:

If an analyst doesn't like a chart, he'll just draw a different line and explain it all over again.

Ha! Ha! I knew I kept watching that show for SOME reason!

Bounce with me!

I feel almost evil being so Bearish against the markets still. However, I shorted Radio Shack and Volt yesterday despite mediocre signals. I even saw that today might be an up-day, although I didn't expect this much! Now, my shorts are hurting, but I'm still optimistic that they'll drop back into the money next week. My one Long spot, Alliance Imaging, helped ease the pain, and I might jump back into that short spot against Forest Labs. Now, what have I learned from all this? I saw the up-day coming, I should have covered my shorts FIRST. Ok, ok, next time, promise!

I'm expecting tomorrow should be a good day to short Mattel. I was also expecting to see a rebound from 3M, but they are really starting to scare me. I've also given up on United HealthCare until they find a direction and stick with it.

Today's gains relieved the excessive selling from the past few days, but I see that I'm definitely not the first person to say that this evening. The long term sentiment still expects things to go down, so this bounce might be done by next week. We'll see!

Anyone know where oil is really going? I just heard a rumor today that oil distribution companies are expecting lower prices soon, while the talking heads say to look for $100 a barrel before the New Year. I know, I know, don't listen to the talking heads, but I gotta have SOME noise in the background.

Utilities, the defensive play

Today the S&P 500's 50-day moving average crossed below the 200-day, albeit 2 months since the index began falling.

Some signs point to a short-term bottom, as the markets bounce after some hard-hitting days. Across the board, everything has been down: Oil, Gold, Stocks, Bonds, and other commodities. Everything, that is, except the Utilities, who's technicals look inverted to everything else (it's moving opposite, like a defensive sector).

I finally found it after looking overseas to figure out where the money's going. If everything in the U.S. is going down, is it all just going to cash (which MANY people say they are doing)? Despite the Israeli tensions, the Middle Eastern markets were way up today, and India had a good day despite yesterday's train bombing in the financial zone. My guess is people are buying into the panic of these countries, expecting things to get better eventually.

However, fighting and bombing are still going on, and I fear there is more blood to be shed "in the streets." I'd say these investors/traders are jumping the gun (no pun intended), or catching a falling knife. Those markets may likely see more losses in the near future.

Back to the U.S., I expect we'll see a short-term bounce (or "rally" as the media likes to say). But I'm still Bearish overall until I see better signs.

And where's the talk on today's Homebuilder Index release???

Finally off Vacation

Ok, it's been several weeks since my last post. I'm sure all three of you have been anxiously waiting for the next tidbit of vital information that will help us all make more money in the markets. R-i-i-i-i-i-i-g-h-t.

Here's a question: With the current fighting in Isreal and Lebanon, and Isreal refuting rumors that it will end fighting soon, why is the price of oil going down amidst this Middle Eastern open fighting?

Possible answer: I heard a trader on Bloomberg radio today saying that it was discovered that during the turmoil and Mid-East oil crisis of the 1970's, oil production in the Middle East continued and oil reserves actually reached record highs. Therefore, there really never was an oil crisis during the 1970's, only speculative hype that put Orwell's 'War of the Worlds' to shame. Meanwhile, weren't we just talking about oil reserves reaching an 8-year high just last month?

Over the weekend, I heard an excellent quote. I wish I knew the name of the man who said it:
"Ethanol is today's Internet Bubble."


By the way, everywhere on TV (except my 2 favorite channels, CNBC and Cartoon Network, which is why they're my favorite) have nothing but the Israel/Lebanon fighting all day & night. I made the mistake of tuning to CNN and can't peel away from the riveting drama of reporters running from falling rockets that stalled on launch. But through all this, did anyone notice that Avril Lavigne got married today? Sheesh! What's happened to news these days???

The end is near! Cats & Dogs living together...

England World Cup Fans Reportedly "Drinking Germany Dry"

June 28, 2006 2:00 p.m. EST

Julie Farby - All Headline News Staff Writer

Nuremberg, England (AHN) - England's s massive army of World Cup fans is reportedly drinking Germany dry, with breweries warning beer could run out before the final game because of huge demand from supporters.

In Nuremberg, organizers revealed 70,000 England fans who flooded the city drank 1.2 million pints of beer-an average of 17 pints each.

According to the Daily Mirror report, one astonished bar keeper Herrmann Murr says, "Never have I seen so many drink so much in such little time," with fans draining all 32 of his 50-liter (11 gallon) barrels available at his city bar.

Murr calculated Britons were shifting beer at a staggering rate of 200 pints per minute.

According to City official Peter Murrmann, "The English proved themselves world champs. They practically drank us dry."

Stuttgart bar chiefs say an extra 900,000 pints were drained last weekend where 60,000 fans partied before and after the 1-0 win over Ecuador. Meanwhile, the Veltins brewery also revealed it produced a record 418,000 gallons in a bid to keep up with demand.

A spokesman says, "It is incredible how much is being drunk but the hardest thing for the breweries is keeping up with the thirst of the English."

CNBC: more fluff, less nutricious

I don't know whether to just get upset at CNBC, or to give them kudos for having a little something for everyone. I'd like to wake up in the morning and see some actual financial "news" while getting ready for my day. Take this morning for example:
I'm not a big sports guy, but the first thing I see this morning when I turn on the only financial channel available in my room is talk about MBA picks. They manage to tie it in to money, but we all know it's really for the sports fan in everyone.
After my shower, I come out to see two political hacks trying to out-shout each other with their own rhetoric on offshore drilling for natural gas. I can't believe the garbage that people will say to promote their cause. After that, they moved onto the "FED watch" and played Europe's "The Final Countdown" for the umpteenth time this week.
But I drew the line when they brought in a professional coffee-taster. All the guys on Squawk Box were gathered around samples of black coffee for a lesson in taste-testing. If my wife had suddenly walked in, she would have probably asked me what happened to the regular cast of the Today Show. Although the streaming quotes across the bottom of the screen might have given it away, first.
CNBC is no Bloomberg, but it IS definitely much more entertaining. That's probably why just about every financial office has TV's mounted up high, tuned to CNBC. But, it's finance, how entertaining can that be just by itself?

Wish my office would put up some TV's...

All's Quiet

As I watch CNBC and listen to Bloomberg radio, I hear the guys that get paid to talk about the stock market saying the same thing I was thinking last night: the markets are trading within a range while it waits for the Fed announcement. Well, hey, maybe I'm doing something right.

Should the Fed really be such a driver of the stock market? Fed rates have always been a factor before, but I don't see what makes it such a big deal now. Heck, even the price of bonds have already moved to 5.25% in anticipation of a rate increase on Thursday. We've become so distracted with what Big Ben Bernanke is going to say that we've overlooked the fact that oil is just plain overpriced. Crude oil prices have long been subject to the slightest speculation because of the volatility of the nations that produce most of it.

Frankly, I think we've been getting the short end of the stick for several years now, to the benefit of OPEC and commodity traders. They're making HUGE profits now, and have enjoyed the good times while it lasts. Oil is a cyclical business, and prices will fall again. OPEC knows it, just listen to them talk. And the Middle East will struggle to cope when all their hundreds (thousands?) of Sultans suddenly find themselves without an income to support their very excessive lifestyles. Only the United Arab Emerates seems to have built an infrastructure to support non-oil industries. It's risky, but I would like to look there for places to put my money.

Everything you've learned about the Stock Market is wrong.

The more I learn about day-trading, the more I realize how the markets really work. And all the famous quotes we've all heard about investing are starting to show their true meaning. Read this, and take heart! Thanks to Barry Ritholtz for bringing this to my attention.

As for today, it's very interesting to watch the Markets leading up to the Fed announcement. There's just not a lot of volume right now, and all the indices appear to be forming a decreasing sine-curve around a mean. In other words, they're hovering within a certain range, just waiting.

We still haven't seen the next big drop that many analysts are predicting. Has anyone else heard about a major turning point occuring on July 10?

Oil's Goin' Down! (um, when?)

Fadel Gheit of Oppenheimer was just interviewed on CNBC's Squawk Box about the Anadarko acquisition of Western Natural Resources and Kerr-McGee. Oppenheimer, incidentally, also sponsored this morning's ticker stream during the show. Back to APC, they're using none of their own cash on the deal, it seems. Apparently, they're taking a loan out a value equal to their own market cap to make the deals. I find that very unusual.

But here's the real story: he mentioned that the oil companies in general are planning around oil moving to $45 a barrel. It's a lower target than what I heard on Bloomberg the other day, but it appears that the analysts are agreeing on a range.

APC's already down 10% in pre-market trading on the news, making the market cap drop below the loan value. KMG is up to 68.91 right now, and the sale price is offered at 70.50. It will be interesting to see how the price moves after the opening bell. A nimble trader might get an opportunity to ride a quick inefficiency.

House of Cards

SAN FRANCISCO (MarketWatch) -- The Energy Department said crude supplies rose 1.4 million barrels for the week ended June 16. They total 347.1 million -- their highest level since the week ended May 29, 1998, the report said.

Crude oil supplies are at the highest level in 8 years, even the Saudis are cutting production because they have nowhere to put their extra inventory. The bottleneck is now at the refining capacity, if there is a bottleneck. What was the price of oil 8 years ago, May 29, 1998? $15 a barrel, and later dropped to $12 by the end of the year! See Chart

Today, the quiet experts are saying that the fundamentals for drilling crude is $50-$55 a barrel. And even the Oil Sands of Canada can stay profitable above $50. Aside from the Oil Sands, I think there's even more breathing room for oil to drop if the floor falls out. And if it does drop back to those levels, watch the UAE for some moderation in its unbridled real estate development.

This supply report helped me to understand the fundamentals behind the early signs I thought I could see. I was wondering why Chavez and his Venezualan gang were pushing a $50 floor on prices instead of the supposed $25 floor. The rest of OPEC, of course, denies that there is any price target. But as Venezuala's comments were shrugged off, even the Saudi's had some comments that displayed concern over prices becoming too low. I kept asking myself why all this bearish talk from the producers when the train is still hauling at full steam.

There is a glut of supply in crude oil. The U.S. has a glut of supply of housing, whether we'll admit it or not by looking at housing starts. It all appears to be a "house of cards", waiting for a slight wind to make it all come crashing down. When it does, I expect to see the stock markets crash with it. But, I also expect to see the large cap stocks to be the first to recover as the survivors move their money into the tried-and-true blue chips.

That's my prediction for today. The real trick is to be able to tell when it comes!

Break's Over

Had a long weekend that just ended. So what did I miss? Looks like Monday turned out to be a bad day for the Indices after all, and today begins the bounce. Then again, only the Dow looks like it's poised to make a comeback. It might have an up day, but I wouldn't expect too much from the Nasdaq or S&P 500.

But who's buying Index ETF's anyway? Here's to UNF dropping another $5, I've got options to cash-in!

Da Bears-s-s-s-s!

I hate to say that I'm already bearish on this upcoming week. We just had a few days of major gains in the markets, but I believe I can already see weakness. Friday showed marginal and slight losses across all indices, and the volume comparisons show that the strength is fading fast on this small upswing. Unless the S&P 500 can climb above about 1260 and stay there on Monday, I'd say we're back to sliding down in falling prices. We'll have to see how the week starts out.

Still, I see longer-term indicators on many stocks (retail) looking good. And I'm finding long-term sentiment in the Smart Money is still bullish for Q4 of this year. Even Cramer (sorry if I don't associate him with the SM above) says July should be a good time to snap up clothing stores before the back-to-school rush, and I agree. Not that I have to validate the Mad Man of Wall Street, but I'm reading the tea leaves myself. And it looks like I'm seeing confirmations that this is still only a short-term market recession.

Good luck, and stay strong!

My Crystal Ball?

As I ran some stocks through technical analysis last night, I noticed a possible trend recurring across several stocks. MACD histograms for these guys looked like it was setting up for a second recovery cycle that just repeated the recent downtrend. What happens after that, if this is the end of the correction or just another cycle, it's too early to tell.

But what I found most interesting is that the trend from these MACD histograms would require about another 10 sessions (8-13 is the range) before we might see confirmation of a long-term rally. Suspiciously, the next Fed rate release is scheduled 10 sessions from now on June 29, the day after my birthday. I'd say it is coincidence, but I'm sure we'll see some strong movements as soon as Big Ben makes his announcement.

A Little Relief

It was nice to see that bounce finally hit today. A few quick trades pulled me from last to first in my Virtual Stock Exchange game today, and maybe I saved a little face.

I see MACD curves on the indices showing positive divergence, signalling the end of down days approaching.

Interesting, Cramer just mentioned all the margin calls that are going on this week. It just so happens that I heard from a trader yesterday who was saying that he noticed a record number of margin calls. A lot of investors were forced to liquidate their positions, selling stocks to pay off margin loans. Brokers putting some of that money back into stocks might be part of the reason things went up today. I noticed a final upturn in the last hour today, that might be a good sign for tomorrow!

I'm sticking with the theory that by Wednesday next week we'll be down again. Now, I'm thinking it might start Monday.