It's KATRINA all over again!!! Shut down the State of Florida!!!!

Tropical Storm Ernesto didn't gather enough strength in the waters between Cuba and Miami to attain hurricane strength. Still, a large storm is about to roll over the state and officials have decided to shut it down. The image below states that max sustained winds will be 45 mph, while the evening news is all over Central Florida (where I live) covering those who are stocking up on ice and putting up hurricane shutters.

I shouldn't be too surprised at this irrational exuberance, given today is around the anniversary of Katrina in New Orleans, 500 miles away. I can understand the officials being 'better safe than sorry', but hurricanes and tropical storms lose strength over land. Ernesto will hit Miami rather hard, but not at hurricane strength. It will cruise its way up through the middle of Florida, losing strength the whole time.

I say Orlando and Daytona are over-reacting, closing schools so that the school buses don't have to drive in 'high winds'. We will get rain up here, lots of it dumped down, but not the high winds.

I'll be home with the kids, checking the markets and reading books. Cheers!

Running Scared

As I plow through a list of stocks to find opportunities, I couldn't help but notice that many companies (listed under $10) are forming symmetrical triangle patterns. Even more interesting, is that the points of these triangles should appear around Q2 of 2007.

Now, from my limited experience, I've seen breakouts from triangle patterns usually happen before the point is reached. I pulled up a chart of the S&P 500 to get a guess of where it might be in Q1-Q2 of 2007. It's currently riding a channel up, and could be anywhere between 1300 and 1380 if it stays in that channel.



That diagonal line cutting the channel was where I noticed some consolidation on the resistance side. The line follows the upper level from March of 2004 through today, with the exception of the breakout and resistance from Nov 2004 through May 2005. I left that in to note some interesting behavior how that line seems relevant. But this it technical analysis, so it might not mean anything beyond this point. The Stochastics show signs of peaking already, but the momentum and RSI still have room to grow (not shown).

I'm concerned about the weakening Stochastics. I'm dropping my shorts (pun intended) and starting to find myself in more long positions. But I'm afraid this may be too much of running with the Bulls, and the Bears will sneak out from the trees and take us by surprise.

The XAU is nearing resistance, and gold itself is showing weakness at the end of its own symmetrical triangle.



Hmmm....

Just When I Thought Gas was Getting Better

It's a conspiracy, I tell ya! These oil barons in South America and the Middle East are creating "news" because it keeps oil prices up. The political wing-nuts can say what they will about conflicts, but oil traders are buying up oil futures on any dip. Oil briefly dropped below $70 a barrel Friday, but it didn't last very long. Here's the article:

"VIENNA, Austria (AP) -- Oil prices rose back near $72 a barrel Monday, rebounding from declines the week before, after Iran insisted that it will not suspend uranium enrichment.

Prices also appeared underpinned by concerns about supply disruptions in Nigeria due to civil unrest and fear of potential hurricanes that could strike Gulf of Mexico refineries. Traders were also watching for signals of where fuel demand is headed in the wake of BP's production woes at its Prudhoe Bay field in Alaska...

Speaking after Iran's military test-fired 10 short-range missiles, Foreign Ministry spokesman Hamid Reza Asefi said a nuclear compromise would have to be reached during future negotiations.

"Everything has to come out of negotiations," Asefi said. "Suspension is not on our agenda."

The U.N. Security Council passed a resolution last month calling for Iran to suspend uranium enrichment by Aug. 31 or face the threat of economic and diplomatic sanctions.

"It is very difficult to decide what to do now in this situation," said Koichi Murakami, an analyst with brokerage Daiichi Shohin in Tokyo..."

Enough said.

Trampled by the Bulls

Ok, perhaps it's time to finally stop being bearish about the markets. I'm getting run over as I scramble to cover my shorts. The play on XING ripped me a new one today, but I've got a stop set at the last high of $11.57. Too late, I realize I should have set a stop at the new rule of 2%, based on Dr. Alexander Elder's rule for risk control.

While trying to figure out which way it's gonna go tomorrow, I've got a few long candidates, and even a couple of new shorts to watch. This rally is really burning energy at a breakneck pace, so I'm curious what kind of breather it'll take. The build was so strong today that I suspect the S&P 500 will definitely be up again tomorrow. The price and volume look kinda like last year, March 13-20, which went a slightly down, flat, and recovered again. Is the end in sight?

No one ever said anything about the 'blood in the streets' to explain this rally. And where are those people who think we'll have another big drop in the next month or two? Heck, I predicted this rebound was emminent, but I'm still not quick enough to actually recognize it in time. But, yesterday marked the first day I begin printing the charts of my trades upon entry and exit along with notes. Here's to finally showing some improvement!

Think Thursday will be an upday or not?

And Now for Something not-so-Completely Different.

Ok, here's something new. Based on what I've read so far from Entries & Exits, I'm experimenting with using some of the charting techniques laid out by Dr. Elder.

First, I looked at a weekly chart of a stock to search for targets, then a daily chart. Using Stockcharts.com, I keep their format of RSI on top, MACD below, but place a Force Index below that, and use three exponential moving averages (EMA) in the main chart. Here's three stocks below:



XING looks like it's getting ready to drop. The weekly chart above has a few indicators pointing toward a long-term drop. So I check the daily chart for recent trends.



The daily chart looks like it confirms the long-term trend. I plan to short it tomorrow.



I heard last week that Ford just hired a new executive who is experienced in M&A (mergers & acquisitions). With all this talk about how Mr. William C. Ford Jr. should maybe look into taking the company private, this seems like a very smart move. So, I decided to check them out as a turnaround target. The weekly chart above shows that a turnaround is, indeed, in progress. But, I'm afraid it's already long in the tooth, and I might wait for a minor correction to go long.



The daily chart shows the stock is still pretty strong. Only the RSI is getting into the "red zone" of the stock being overbought. All the other indicators show that this stock is going places, but I'll wait for a pullback before getting in. I just hope a pullback will be worth waiting!



This is a stock that I did for a friend, just to see what it looks like. And it doesn't look pretty. This stock looks like it's just going sideways after a nice runup, and I can't really tell after that. The primary MACD Histogram and EMA slopes are telling me to short, but the RSI is giving a mixed message. Perhaps I'm giving too much credit to RSI?



3 out of 5 indicators are telling me to short, and that's just not confident enough for me to make a solid decision. RSI and MACD histogram slope are going up, but this is short-term, and I'm really not too attached to the trendline that I have drawn. If I had to guess, I'd say HOLX will go up for a brief rally, then come back down in toward my support line.

Feeding My Head

I'd like to take a moment to mention a couple of the books which I am currently reading through. The first one is called, "Ahead of the Curve: A Commonsense Guide to Forecasting Business and Market Cycles", by Joseph H. Ellis. It has opened my eyes to some common sense macro-economics that I had never before understood. The basic premise is that the primary driver of an economy is consumer spending, and it is best measured in year-over-year percentage changes. Of course, there is so much more, or else it would be quite a short book! Heh.

The second book arrived yesterday, so I have put the first book on pause in my eagerness to read the new one. It is called, "Entries and Exits: Visits to Sixteen Trading Rooms" by Dr. Alexander Elder (I paid less than $50 after shipping at Half.com). I'm already about 1/4 into the book and devouring its insights from other traders. Since I don't know any traders personally, this has given me firsthand knowledge into several trading styles in detail. The book was written at an intermediate level of a Stock Market investor/trader, a level that I believe I am finally pushing into. I'm even proud to say that I had started developing similar approaches to reading charts that these professionals use. I should also mention that everyone in the book appears to be a pure technician.

Back to reality, it's time to take a break from reading to put some new knowledge and enthusiasm to use! Good luck on Monday!

Score Another for the 'Terrorists'

Well, well, well. A plot was foiled in which "liquid explosives" were going to be used to detonate airlines in the air. So what's the kneejerk reaction? Immediately confiscate ALL liquids brought on by passengers today... and for who knows how long? I didn't hear of a single incident of any liquid explosives actually being confiscated today, nor would we.

Now, thousands upon thousands of innocent people have been severely inconvenienced, frustrated, annoyed, and forced to play a part in this charade to tell the world that we are on guard. I was so close to have been traveling this weekend, but now I might not even return back to my contract job in Connecticut just to avoid having to deal with airport security to fly home for the weekend! It was already bad enough that ticket prices are rising.

And how about those markets today? The talking heads at CNBC were all giving their commentary and analysis on why the markets didn't plummet, and why crude oil fell, bonds are up, etc, etc... I still have my theory that there's a lot of active players in the Market, all trying to out-step each other. Everyone's thinking two or three steps down the road, but it's still all speculation. Crude oil dropped, 'because demand for jet fuel will be reduced as people are too scared to fly,' yet the airlines regained their opening losses. Gold dropped while T-Bonds climbed. The dollar rose as the TV journalists claimed it was 'fear in Europe, security in the US.'

It was an up-day today, but the markets opened down as the pre-bell news had the early risers in fear. I'm starting to hear more talking heads say that we should see some better days in the markets for the next month or two, followed by a squall-line of thunderstorms due to a cold front in late Fall. After that, possibly a Santa Claus Rally preceding the final doom-&-gloom final Bear rally in early '07.

Check out these 10-yr charts of the S&P 500.



The lower graph is the Slow Stochastics. During this past 3-yr rally, the SS has indicated bullish and bearish runs in an almost regular interval, although the degree of change has gradually reduced. This has continued until the most recent bearish run, where the degree of weakness is greater, possibly indicating a weakening state. This also concerns me because the SS is showing that it may be preparing to reverse into a bullish run, the current prices don't support that. Slow Stochastics are a lagging indicator, so the S&P 500 should be heading back north, which it is not.



The momentum indicator shown above also supports that the 3-yr Bull Run lost most of its power after the first year. It's had lackluster support through modest gains for 2 years, but does look due for another temporary runup for the next 4-6 months.

Might be time to cover my shorts... for now.

Back in the Saddle

As I sit on my couch this morning, flipping between CNBC and Bloomberg, I realize that I missed a very interesting day last Friday. I spent the day driving back home to Florida from my temp-job in Connecticut. This morning, I see that everyone is making their final bets on Tuesday's Fed Rate. It's still all about the Fed Watch.

I want someone to start "Hedge Fund Watch." These guys are all tripping over each other, trying to out maneuver the next guy by getting in first on any news. That's still my best explanation as to why GDP is reported down (the economy is slowing!!!) and the market rallies for 6 days. The Wall Street short-term thinking is still the way it always was, but now there is more money in the hands of those who would trade the news. I say betting around the HF's might be a good strategy: see where the money flows on crazy news, and then hedge against it. Could you call that a "Fund Against Funds"?

Futures are down, Europe is down. Is it finally safe to go short on some of those stocks that shot up last week on up-earnings? Volume seems to support that, so here's hoping I can get the money back I lost!

It'll be nice to have Bloomberg again. The hotel I was staying at only had CNBC, and they do somthing in their ads that annoys me. CNBC is constructing their advertising in an attempt to prove to my why I SHOULD be watching them. Notice what Becky Quick says right before commercial on Squawk Box, or the ads as to why we should be watching Fast Money. Granted, I like hearing real day-traders talk (since I don't know any personally), I have to add some salt to the conversation given the venue.

Crazy Markets!

So, what's going on? There is so much debate on whether the markets are coming back to rally, or what. Look at these charts, the DOW and NASDAQ show signs of leveling off their declines and making a comeback.



The Dow's got a nice channel going. But the MACD indicates that it might not head back down to the support line. Hmmm, a good sign.



The NASDAQ doesn't have too much to go with. But there is the same positive divergence as the DOW. Another good sign.



The Gold Bugs Index closed today with a price that confirms a resistance level. If it goes up tomorrow, I might consider that a breakout. If it goes down, however, then I'd say we're still waiting for the next FED guidance.



The S&P 500 looks like it's moving nicely in a new channel. I don't see a lot pattern confidence here except the resistance level. This might not be a good sign, except consistent bouncing against the resistance might indicate a desparate attempt to break out.



Finally, the bond rate. Bonds seem to be confirming the statements made by PIMCO's Bill Gross last Friday. He forsees a Bond rally soon. Bonds should be rising in the near future, perhaps after one more ride up the channel as the daily talking heads pump up the Fed Watch.

But if Bond prices go up, aren't the stocks supposed to go down?

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."