Monday, December 29, 2008

Declining 50 Day Moving Averages

Its easy to make a case for the bears right now since the underwhelming Santa rally has run out of steam at the 50 dma. In the small caps above you can see sell signals showing up as well. The fact of the matter is, in a long term downtrend the declining 50 dma is a low risk place to enter shorts (low risk because you just cover if prices overtake the 50 dma). It certainly is still possible that some upside momentum might be salvaged for an early 2009 rally but every day we spend below the 50 dma the odds get lower. Its time to look into opportunities on the short side and here are a few that popped onto my screen this morning:

I know its hard to short a stock at 10$ that was over a $100 a year ago. But DRYS was also $3 a few weeks ago. I think it could go back there.

This CSX pattern is a nice clean break, the trangle targets roughly $15. Note that the break occured today and the market is not closed yet.

SHLD is more of an example than something I would actually short, notice how the stock is so weak that it can't even reach the 50 dma.

Good luck!

Saturday, December 27, 2008

Saturday Rock Blogging: Rag Top Day

Hope everyone is having a good holiday, I won't have sufficient enough internet access to do a real post until Monday. Till then, enjoy some Buffett...

Thursday, December 25, 2008

Monday, December 22, 2008

Shorts have the upper hand

Its looking pretty clear to me that the strength that I witnessed over the past few weeks has left the market. I'm open to the possibility of a renewed rally but those 50 day moving averages need to be recovered pronto. In the meantime I took some profits on FSLR, JASO and TINY. Also got stopped out of those IWM calls. It certainly hasn't helped that oil is caught in a deflationary death spiral. I am still holding on my DXO and USO calls based on the belief that oil is capitulating (bottoming) but it feels like I'm catching a falling knife. I don't think stocks are going to be able to rally until oil stops collapsing.

Good luck out there. Technically speaking, I have to say that the shorts have the upper hand on all time frames now. I'll be on holiday without internet so there won't be any posts until Friday at the earliest, then sparingly till 2009. Hope you all have some happy holidays.

Sunday, December 21, 2008

The Rally is at Risk

Generally speaking, in an intermediate term trend a good place to add to or enter positions is the 50 dma and that appears to be whats going on right now. Stocks are both in a long and intermediate term downtrend and sellers are stepping up here at the 50 day moving averages. After breaking through these levels on the Fed announcement last week, the S&P, Dow and Q's have since slipped back below their 50 dmas. Only the Russel 2000 (IWM) managed to hold above as stocks closed Friday. Now I'd like to give the benefit of the doubt to the leading index (R2K) so I am hoping (and betting with IWM calls) that the rally will continue with a strong push above the 50 dma's next week. Hopefully the bulls will get organized and take advantage of the low volume, holiday shortened week to stage an attack on the bears. However, the fact remains that stocks continue to be in an intermediate term downtrend and the 50 dmas have placed this bear market rally at risk.

Saturday, December 20, 2008

Saturday, December 13, 2008

Four Cases of Stocks Up on Bad News

Lately its seems like investor sentiment has been improving but its hard to pin down exactly why. One thing I've noticed over the past week or so is that stocks are shrugging off bad news. They will initially be down on some worst than expected headline number and reverse course later on in the day. Without thinking too hard you can see how this might be a good thing. If stocks aren't going down on bad news then what will happen if there is even a hint of good news? It seems to me like the mood is shifting towards more optimism about the market. When stocks are down it is being perceived as an opportunity rather than a reason to panic. So for you tonight I've got four extra ordinary cases of stocks going up on bad news recently.

1. Stock market rallies on worst than expected job losses, largest in 34 years.

From Bloomberg Friday Dec 5th, "Employers cut 533,000 jobs last month, bringing losses so far this year to 1.91 million, the Labor Department said today in Washington. November’s drop exceeded all 73 forecasts in a Bloomberg News survey. The unemployment rate rose to 6.7 percent, the highest level since 1993. ...

Payrolls were forecast to drop by 335,000, according to the median estimate in the Bloomberg survey. The jobless rate was projected to rise to 6.8 percent. Revisions for September and October increased job losses by 199,000. November was the 11th consecutive drop in payrolls. ...

Stock futures sank. Contracts on the Standard & Poor’s 500 index lost 2.1 percent to 829.90 at 8:34 a.m. in New York. "

Yep the futures sank alright, just before they popped to gain 4%+ on the day. Note the first red arrow in the chart below, the second red arrow is from #4.

2. Semiconductor stocks rallied on disappointing earnings and lowered guidance.

"Texas Instruments(TXN) tore down its estimates for fourth-quarter results late Monday, offering a revenue midpoint that was 30% below third-quarter results.

Similarly, National Semiconductor(NSM) said its fiscal third-quarter revenue would fall 30% sequentially, well below the Street's consensus analyst estimate. "

Despite the bad news NSM popped more than 10% and TXN was +6% along with the entire sector which had gaped lower Tuesday morning on all the bad news. Now some would make a lot bigger deal about the semiconductor strength than I will. In the last two bull markets this sector was a leader and was widely followed by traders looking for guidance. There may be some truth to this philosophy because the last peak for SMH was in July 2007, three months before the all time high in the dow and S&P. Personally, I preffer to follow the small caps for leadership.

3. Solar stocks held on lowered guidance and downgrades.

Tuesday, "shares of several solar companies sunk after German photovoltaic cell producer Q-Cells SE lowered its outlook through 2009 because of an expected inventory glut."

Then First Solar, was downgraded to Wednesday by Stanford Research.

And later that day, JASO CEO Samuel Yang said "over the past few weeks, we have seen a dramatic slowdown in orders, which we believe is related to macro economic conditions."

Well the solars didn't exactly pop on the news but they didn't sell off either. Each dip was met with buyers and TAN, the solar ETF, remained in a two week range. This is more of a case of stocks not dropping rather than rallying but its bullish that these stocks were able to shrug off bad news.

4. Broad market rallies with auto companies on Senate auto bailout rejection.

"Dec. 12 (Bloomberg) -- European and U.S. stock-index futures tumbled as the Senate’s rejection of a $14 billion rescue package for American automakers threatened to deepen the global economic slump. Treasuries rose, while the dollar slid. ...

“When something like this news hits the streets, all the good news is gone,” said Nicole Sze, a Singapore-based investment analyst at Bank Julius Baer & Co., which manages $350 billion. “Given the concerns over the job losses if the auto industry were to collapse, and if the rescue fails, it will send a big dampening effect to investor sentiment.”

Futures on the Dow Jones Euro Stoxx 50 Index, a benchmark for the euro region, lost 117, or 4.7 percent, to 2,369 at 7:42 a.m. in London. Standard & Poor’s 500 Index futures expiring in March slid 4.1 percent. The U.K.’s FTSE 100 Index is set to open 151 points lower, according to IG Markets. The MSCI Asia Pacific Index lost 3.4 percent. "

We got this news Friday morning, which nuked the overseas markets and US futures. Somehow stocks crawled back and managed to even close green. The dow and S&P gained about .7% while the small caps vaulted over 3%. GM closed down only 4% after having crashed 37% earlier in the day and Ford was up 5%. Now I realize there was alot of speculation in the media about a Treasury funded rescue but I think many agree that would have been expected in the event of a Senate rejection. The big news was that congress rejected the automaker's requests/plans, and stocks went up despite that news.

I think this another good reason to believe a major bottom has been made in stocks. I'm not saying the bear market is over or that the ultimate lows have been made. But I think stocks are due for a prolonged rally that may or may not develop into the next bull market. When I see stocks moving up on bad news I take that as a sign that its time to be buying dips rather than shorting rips.

Disclosure: I have bullish positions in solars, NSM and RUT.

Saturday Rock Blogging: Duke's Place

Wednesday, December 10, 2008

Oil ETF Volume Surges to Records

Volume is surging to the highest levels since oil exchange traded funds first started hitting the market a little under three years ago. You can see it in USO above and in DXO, the powerShares crude double long below, both of which I own. Is this the bottom?, all we can be sure of is that these ETFs are at all time lows as volumes surge to record highs. Typically bottoms happen with well above average volumes but today's price action was indecisive, note the doji below. In other words, the volume is there all that is required now is price movement (out of the falling wedge).

Monday, December 08, 2008

Almost a Bottom in Oil

There is still no sign of a bottom on the oil daily chart (see USO below) but the massive falling wedge is reaching it's apex as volume picks up to levels not seen since the top. It won't take much for oil to break out to the upside and when it does the move should be substantial. As for targets, the 50 dma is more than a 50% gain from here and the 200 dma is a staggering 100% gain. With supply getting cut off and demand stimulus, its hard to see crude not moving higher from here. There are early reports that the collapse in gasoline prices is leading to increased demand from drivers and I'd expect to see more of that. If the US dollar weakens that will add fire to fuel.

Looking back at the 2003-2005 price action, $40 looks like it could be an area of significant support for crude. As you may recall, the low on Friday was $40.50, which I expect should be enough to bounce oil out of this wedge. A fellow trader Xerxes had a great idea in the double oil long DXO which has fallen to under $3.0, and I bought a good chunk of it today to add to some USO calls.

By the way, if crude does take off I would think the solars take the lead of any rally in US stocks. So on top of my USO and DXO positions I also have calls on JASO, SPWRA and ENER. Good luck out there!

Saturday, December 06, 2008

Saturday Rock Blogging: (Nothing but) Flowers

The last step to confirm a major bottom in the small caps (IWM) is to close above $48.26 on increasing and above average volume. We have already broken out of the wedge, volume is increasing and multiple daily indicators are diverging (bullish). Hopefully Santa is also looking at this chart and likes what he sees.

Tuesday, December 02, 2008

"for whom the bell tolls, it tolls for thee"

You know things are tough when shareholder letters quote Donne. This is just the beginning of a sobering letter written by the executives of TINY to their shareholders yesterday:


"No man is an island, entire of itself; … and therefore never send to know for whom the bell tolls, it tolls for thee."

-John Donne, Meditation XVII from Devotions to Emergent Occasions

In June of this year, just before the end of the second quarter, we raised additional equity capital by placing 2,545,000 of our common shares at $6.15 per share (stock was $3 the day they sent this letter), for net proceeds after all offering expenses of $14,383,497 (They are essentially saying they have a sweet profit on their self short). Upon the announcement of this registered direct offering to financial institutions, we received a fair amount of criticism from shareholders, even from some of our long-standing shareholders. Some expressed their opinion that we should not have raised additional capital at all, given our debt-free status and our relatively large holdings of U.S. treasury securities prior to the offering. Others objected to our timing, wondering why we did not wait for the stock market to improve, as June of this year was the worst June in the U.S. stock market since 1930. Although we had no idea at the time that June's market tremors were just a prelude and that the world financial system would collapse in the third quarter, we raised that additional capital at the end of the second quarter because we have always believed in maintaining a balance sheet with a margin of safety."

Reposted rock blog.

Monday, December 01, 2008

Small caps lose 11.85%, worst day in years

The title says it all, here's a link. The headlines are blaming this on the official recession call that was made today by the NBER. Of course this news is no surprise to most market watchers. CR at Calculated Risk has been using Dec 2007 as the beginning of the recession in his charts for more than six months now. Furthermore, we saw the stock market slip into a bear market just one month after the recession officially started so the market has been telling us we are in a recession for a while now. This is yet another triumph for the power of technical analysis. The charts told us what we heard today from the NBER, but 11 months ago. Today's selloff was the result of a declining volume rally up to resistance in a long term downtrend. In other words, it was purely technical.

As for this sell off, I still think IWM won't have any trouble getting to the lower end of this falling wedge around $40 but we are most of the way there. I'd expect a good bounce from there and at some point soon we will see follow through into a significant multi month rally. This declining volume falling wedge is setting up for a very big rally to begin sometime soon.

Disclosure: I started an IWM call position at the close today.

Sunday, November 30, 2008

The small caps are at an inflection point

As I mentioned on Friday, the market leading Russell 2000 small cap index (IWM) is clearly at an inflection or "pivot" point. You can see it in the falling wedge formation above, and note that this pattern is typically a sign that a move is becoming exhausted. The rising wedge can be an excellent topping formation, see this awesome example. In other words, the longer term decline seems to be loosing steam. On the intermediate term time frame however, the small caps are running into resistance at the upper end of this wedge as evidenced by Friday's tail. Also, volume has been declining and all the RSI and stochastic "oversoldness" has evaporated in the past week. So we are ripe for a nice sell off from here but if IWM can push a little higher it should be able to pop up to and test the 50 dma currently aty $53.79 (which would be a very good place to enter shorts). One encouraging sign for the bulls is the CCI crossover that occurred on Friday, this is a very bullish buy signal but again, volume was weak (didn't confirm). So what I'm saying is that, the market is unlikely to sit here. The most likely scenario seems to be a drop down to the lower end of the wedge around $40 with the possibility of making new lows, but a pop to $53 is certainly possible. Good luck, I'll be trying some IWM shorts tomorrow morning but if the market does break out I'll be picking up TINY calls.

Thursday, November 27, 2008

A TINY pivot point (nano)

This TINY chart looks alot like IWM and maybe justly so since its market cap is pretty tiny at about $100M. Both charts have this failing descending triangle breakdown look on a daily timeframe. While I am not convinced in the sustainability of this rally based on the weak volume, this price action is very constructive. If TINY or the small caps (IWM) can push a little higher, volume should move in as technical buy signals get triggered. On the other hand, resistance at this pivot could lead to a short term top on Friday. TINY seems like a good cannidate for a quick double if/when it does break this $3.85-$4 area, just watch out for resistance at $5 and up into the lower 5's. I've got the 5yr monthly chart below, the stock has efectively been in its own little bear market since earlu 2004 after peaking at $25.

Harris and Harris Group (TINY) is a vernture capital fund which invests in nano start ups, read more about it here. This model seems like a great vehicle to me because odds are most nano businesses will fail but one could be a home run and easily pay for all the failures. Think Cypress Semi's spinoff of Sunpower. They have stakes in about 30 nanotech start ups in a variety of industries. Even as this might sound like a very high risk, financing dependent space, this stock has actually been able to hold its 2002 lows. I think it would be safe to say that among the market leading small caps, TINY is a leader. And as I see nanoscience as the future of science and technology, it makes sense that TINY would be a market leader among leaders. I hope everyone is enjoying a relaxing Thanksgiving holiday, cheers!

Monday, November 24, 2008

I'm not convinced

While this two day rally is impressive, I'm not convinced we've seen the lows for this cycle. I look to the small caps for broader guidance and they have yet to break a major level of potential resistance and have merely climbed back to the breakdown point on mediocre volume. Even if the market plows higher, there just isn't enough buying interest to propel us through all that resistance. I still think the market needs a capitulation event to draw in significant buyers. Tomorrow may be pivotal, will the GDP # confirm a textbook recession?

Citigroup needed a bailout?! or Inverse Capitalism

What is this world coming to that Citigroup gets $300B+ in taxpayer guarentees for being complete idiots? Oh sure you guys made a fortune creating all this toxic stuff, but now that the chicken has come to roost you can sit back ad relax because the taxpayer has your back. What BS inverse capitalism is this? The sheeple reporters will hail the government for taking an equity stake but its only $27B, and at double the current market price (so effectively $13.5B plus a $13.5B subsidy). Its a slap in the American tax payer's face and I hope they get Paulson in jail for this atrocity. Let me get this straight, the government is backing $306B in debt, and injecting $27B (not including the last $25B) in exchange for a rapidly declining $13.5B investment. I feel like a chump, being an American taxpayer and all.

The real news here is that Citibank needed a bailout this weekend. Sure, we noticed that something was not quite right last week when C plunged 60% but things must have been catastrophic for them to need another third of a trillion in government money over the weekend. Will this save the market or will it spook us into a panic? Who knows, but the trend is clear, Citi tanks:

Sunday, November 23, 2008

Oil: The Model Short

Its somewhat stunning to see the lifeblood of modern society to fall by 2/3 in less than six months, could we have seen it coming? The oil crash of 2008 was a textbook short and gave a number of winning sell signals on the way down. If you are looking for some good signals for trading anything take a look at this chart:

There is still no sign of a bottom in oil but its obviously way too risky to short here. Maybe if oil could manage to rally back up to the 50 dma but thats pretty far off at this point. I have the "ultimate fib" on there, but so far it has not provided any support at $56.50. If oil could recover that level it might be worth watching for a ride up to the 50 dma (~$75), I'm not holding my breath.

For a quick comparisson check out the dow over this same six month time period. There's not a whole lot to say here other than that volume is picking up which suggests some kind of bottom is near. However, after cracking through some major support levels last week its going to be tough for the market to rally without a capitulation event which we just haven't seen yet.

The ideal situation for the dow from my perspective would be a big washout early this week followed by a seasonally reinforced rally into 2008. Perhaps a Citigroup bailout will be the catalyst for a major panic/capitulation next week. Good luck!

Saturday, November 22, 2008

Saturday Rock Blog: Shipping Up To Boston

These guys rocked the Canopy Club last night, my local venue.

Friday, November 21, 2008

The Ultimate Fibonacci Retracement

With the market breaking to new lows many are wondering how far this POS market can fall. A good guess would have been support levels from the supposed 2002-2007 bull market (although we can't really call that a bull market anymore now can we), well those all broke pretty easily. The next obvious level of support would be the 2002 bear market lows, those are breaking right now. Where else can we look for support?

I was thinking about replacement levels today and I began to wonder what a complete Fibonacci retracement would look like. That is, a fibonacci retracement of the complete move up from zero. This would represent the biggest possible pullback suggested by Fibonacci analysis. In a way this idea seems very appealing because the current economic and market failures are unprecdented in the history of mankind. Maybe its time for the first *real* pullback in the long term bull market that stocks are supposedly in. So what I'm going to refer to henceforth as the ultimate fibonacci retracement is a 61.8% pullback from the all time highs. Those levels are:

The Dow Jones: 5,423.67
S&P 500: 602.06
Russel 2000: 327.18

Note that this is irrelevant for the Nasdaq which is already well below the ultimate fib reftrace level from the dot come bubble.

Ten Years of Work Lost in One Year (S&P 500)

Buy and hold strategies are a sucker's game. Clearly.
A few things to point out. Notice how the eleven year range broke to the downside today. There should have been support at the 2002 lows but the S&P sliced right through them. Noting how the S&P slightly broke this range to the upside last October (2007), there is still a decent chance that this break will reverse and hold the 2002 lows having only slightly cracked them. But the fact is they broke today on huge volume and all indicators point straight down. There is nothing but air down to the '94 lows at 450. This appears to be the beginning of a new phase lower in the bear market for the S&P 500 but the dow and small caps have not yet broken their 2002 lows. Its really incredible how quickly stocks have fallen. Any buy and hold investor in the S&P 500 in the last ten years is at a loss right now, and interestingly, so are any Goldman Sachs investors.

Thursday, November 20, 2008

Sunday, November 16, 2008

At the edge redux

Well, after heavy selling late last week we are back at the edge. See last Wednesday's post for more on the details of that. I'm still expecting a big rally, noting the positive divergence in multiple indicators. But the possibility of a big break lower must be taken seriously and I would point you to moontrader's work which I thought was interesting. He's seeing a spiral in time, a Fibonacci series pointing towards a major bottom on 11/24 - 11/26.

Saturday, November 15, 2008

Saturday Rock Blogging: Rock Lobster

Here is the music video version (not live) for those interested.

Friday, November 14, 2008

Lobster Prices Tank

Some really, really good things are coming out of the US recession.

For example, "lobsters cost about $2.80 to $4 a pound in Boston. Last year they were $4.50 to $5 per pound. On the North Shore and Cape Cod, lobsters cost about $2.50 to $2.75 per pound.

"Go right on down to your local harbor and knock on the back of a boat and say, 'I'd like to buy some lobsters.' This is the time to buy them. A 1 pound lobster off the back of a vessel is cheaper than an ice cream cone," Feeney said."

Lobsters cheaper than ice cream!? Where do I sign up?

Hat tip to Lauren for this find.

Thursday, November 13, 2008

Full Moon Failed Breakdown Reversal!

Do you believe me now about failed breakouts? Its really incredible to see technical analysis work so well sometimes. After breaking those October lows the market reversed and exploded higher.

One reader had a nice metaphor for today's action in saying that "stocks rocket up their rears as they fell off the cliff and ignited the rocket midair." This was precisely the action I cautioned about last night when I said to "be aware that if a breakdown reversed it would also turn out to be a powerful move back up, so stops are essential either way you play this." I feel more confident than ever that the bottom is in for 2008.

I also wanted to point out a few other indicators that support the notion for a bottom in stocks aside from the obvious reversal candlestick today. First is the divergence in the VIX. Despite most stocks having made new lows today, the VIX made a significantly lower high:

Note that the divergence in the RSI and CCI on the VIX and especially note that the CCI flipped back below zero again. If the VIX were a stock I'd be shorting it right now, itjust needs to break that 50 dma to confirm the intermediate term downtrend. And its the same story with the put to call ratio, positive divergence over the past month (lower highs despite stocks making a lower low):

And perhaps the most compelling indicator of all is the extreme divergence in the new highs-new lows index. It made an all time low of -2477 at the October low but has managed to climb back to roughly 600 since. This demonstrates that the underlying market technicals have dramatically improved since the October lows and also that we saw a historic level of panic last month that we were no where near today (despite lower prices breifly today). Try plotting this on a longer term chart and you will find that downward spikes match up precicely with major market lows and you will also notice that the October spike down was much, much greater than any before it.

Finally, these are crazy times and in crazy times people will look for anything they can to find order amidst the chaos. One strategy I heard nothing about in the bull market (because its silly) but have heard alot about recently is the use of astrology in technical analysis. That is, basing investment decisions on the phase of the moon, planets and stars. Believe me or not, it is becoming increasingly popular to connect the cycles of the stock market to the cycles of the moon. Now I wouldn't put much weight in this other than that over the past few weeks I have heard some highly accredited investors (Art Cashin and Robert McHugh among others) say that today would be the day of the market bottom based on today's full moon (and other things of course). Well, needless to say those people were vindicated with today's epic full moon failed breakdown reversal. I think we all owe the moon a round of applause, go moon!

Wednesday, November 12, 2008

Stocks sit at the edge of a cliff

The title says it all. Just below here we see support at the October lows but below that is a pocket of air. I've got the dow above but pretty much all the indicies (small caps especially) share the common quality that another red day tomorrow (1% or more) will confirm a major technical breakdown (new multi year lows). The next expected area of support would be the 2002 lows at 7,200-7,500 but the target from this pattern is roughly 6,650 (8,150-1,500 above). But, and this is a big but, I expect prices just below here (8,150) would provide significant support based on the October panic lows, flat lower Bollinger bands, signs of a bottom on weekly time frames and a general psychological turning point. In other words, I'd expect a big bounce tomorrow or a big drop tomorrow. If we drop and don't recover things will be real ugly Friday. If we bounce however, then the upper end of the range will come into play (18%) higher. As regular readers know, I am definitely expecting the market to fall further, 6,650 doesn't seem unreasonable at all, but first I'm looking for a big rally into 2009 from here. If there's one thing this market has taught me its to be open minded. The charts are telling me that if the market goes a little lower it will go alot lower. Conversely, if the market finds support here then it should rally at least 18%. But be aware that if a breakdown reversed it would also turn out to be a powerful move back up, so stops are essential either way you play this.

I will do a follow up post on energy and solar soon, it sucks what is happening to those stocks right now but at least gasoline is cheap again.

Monday, November 10, 2008

GM Death Spiral or Another $0 Price Target

This time its on GM, already down over 90% in a year. Whats with these jerk off analysts, have they no shame? To set the record straight and note the incompetency of Deutsche Bank (read douchebag bank) (DB) analysts, I'd point out that they had a buy on GM as recently as February and were recomending hold until today. I find it comical that they tell their clients to hold GM all the way up until today when they recomend selling and the stock drops another 30% under their clients. I'm sure that DB's customers that held until now were happy to see their bank finally recomending sell to save the last 5% of their investment. Way to go douchebag bank! Note this is a follow up to a post I did on IMB.

Sunday, November 09, 2008

Markets face resistance but is a Santa Claus rally looming?

The only missing component of a sustained multi month rally is an obvious higher high on the dailies. After massive worldwide government stimulus, the Dow Jones has managed to trace out a series of higher lows as confidence slowly returns. Most indicators are showing positive convergence on the daily time frame but a wall of resistance lies just above with recent highs at 9654 and 9794, also the 50 dma at 10,000. I expect that if that recent high at 9654 breaks we could see a domino effect of strength up through 10,000. If that scenario comes to pass then I think it would be easy for stocks to follow through with a seasonaly favorable December rally. My target would be the 200 dma up around 11,500.

IWM looks similar but is much closer to breaking out than the Dow Jones. If IWM get over $55 I'd expect to see some real fireworks in the small caps since the measured rule for the inverted H & S below targets roughly the 200 dma (over 20% post breakout).
Disclosure: I own calls on a number of stocks and ETFs.

Saturday, November 08, 2008

Saturday Rock Blogging: Theme From The Bottom

My theme from the bottom: be patient but honor stops.

Monday, November 03, 2008

Opportunities Abound in Solar

JA Solar, a long time favorite, has recovered my line in the sand: IPO support/resistance at $5.5. Things are looking good for JASO, I could see it hitting $12 easily. Beware earnings are coming up on the 12th but I think risk is limited, note the S&P upgrade today:

"“We expect strong earnings growth over the near-term,” he writes, “while the price of the shares has fallen notably based on various concerns such as margin pressure and the potential need for capital for expansion.” He notes that the stock trades for under 4x his 2009 EPS estimate of $1.50 a share. Montevirgen, however, slashed his price target on the stock to $9 from $20."

I'd also note that Sun Power quietly posts blowout results during the market chaos of recent weeks. SPWR is another one of my favorite solar stocks as its the leading producer of Silicon based cells in the US.

I recently posted about FSLR looking great as well.

What I hear many traders talking about right now is the potential for an Obama election to boost certain stocks and solar is cited as a prime cannidate. While I would guess this is already priced into solar stocks, long term Obama seems to be very serious about subsidising solar. Whether or not you agree with the politics of it, US photovoltaic producers could see some greener pastures ahead.

"Finding the new driver of our economy is going to be critical. There is no better potential driver that pervades all aspects of our economy than a new energy economy ... That's going to be my No. 1 priority when I get into office, assuming obviously that we have done enough to just stabilize the immediate economic situation." -Obama

Disclosure: I own JASO and SPWRA calls.

Sunday, November 02, 2008

Expecting a pullback then follow through

Just a quick post on the small caps tonight. Last week the small caps (IWM) broke down to new five year lows out of a symmetric triangle and it looked pretty bleak for the leading index. That move reversed it's self and we got a sharp move higher. Some aspects of the IWM chart look pretty good; obviously the failed breakdown, then there's the CCI crossing zero, stochastic buy signal and multiple positive divergences, but I am also seeing some reason for caution. The volume has been pretty much average this whole time, not the surge that the bulls should be hoping for. Also, the lower trend line of the symmetric triangle and the apex lie just above would should provide significant resistance around $55. Based on this chart I'd expect a pullback early on this week and then hopefully we'll see some follow though after the election and an intermediate term uptrend will be confirmed. As mentioned before, I am expectiong this rally to last for 3-4 months.

Disclosure: I own IWM calls.

Saturday, November 01, 2008

Friday, October 31, 2008

Zombies Overrun Wall Street

Eat those useless malfunctioning brains! Zombie images from here.

More on the melting economy Manhattan ice sculpture and source here.

From The Big Picture.

Comic from Cat and Girl.

Jack-o-economy from here.

Happy Halloween everyone!

Awesome Examples of Failed Breakdowns

This is the 400th post, hurray! Both of these failed moves came from blowout earnings report and great guidance, I'd encourage you to look into these reports. FSLR and ICE both gaped higher and ran to the highs today on massive volume. In doing so they reversed significant chart breakdowns from the days prior. As I mentioned on Sunday, failed moves lead to fast moves and that's exactly whats going on with these two. Its hard to see these slowing their ascent for a few days. Click on the charts for more details.And by the way, yes, I am now bullish on First Solar. If you recall my multiple bearish posts before about FSLR, I thought it was an over bloated pig at $300 with a 150 PE. I said my target for it was $120 and it went there. Now their PE is a more reasonable ~25 and FSLR does have some good things going for them; Obama's energy policy, residential expansion, lowest cost per watt and they are demonstrating resiliancy in the face of economic hardship. I currently don't own any FSLR but looking to add and I have some JASO and SPWRA calls.

Tuesday, October 28, 2008

Failed Moves Lead to Fast Moves

What we had today was an orgy of failed patterns. As I mentioned on Sunday, all of the major indices had broken down out of huge symmetric triangles with the NASDAQ and small caps making new 5 year lows. I won't speculate on why, though I have some ideas, but the breakdowns all failed. I got the title of this post from Brain over at Alpha Trends and it nails exactly what happened today. All last week and yesterday you had bears banging their fist on the table calling for an "extreme capitulation" event where everyone goes into a state of panic and the Dow drops 1,000 or so more in a day. Wouldn't that have been nice? Everyone was expecting it and just when it looked like it might happen, reversal. From that failed breakdown we got this massive rally, the biggest in history. All major averages except the Russell 2000, curiously, were up more than 10% today. I think this chart from Moontrader over at Luna $ Ticks really captures the significance of the reversal and ensuing breakout:

I love this chart, it really demonstrates the power and utility of technical analysis. So where do we go from here? As I have been saying for weeks, I am looking for a bear market rally that will last 3-4 months from this bottom. Was today the bottom? We will only know with certainty after a few follow through days but after today I think the odds are very good that the lows for 2008 are in. Tomorrow is a big day with the FOMC meeting, then the negative GDP data is Thursday and I would expect a bear attack after both. Also, I am worried somewhat about the weakness in the Russell 2000 which, as you know, I think leads the way. We need to see that index play catch up over the next few days as the other indices consolidate. Despite some issues, I think the tide is finally turning for the bulls but I'm going to try and remain objective.

It's over nine thousaaaaaand! (the dow)

Monday, October 27, 2008

New York Times, 1911 on the Panic of 1873

I thought this old article gave some interesting perspective, its incredible how little we have learned in all these years. I got this from The Big Picture blog, one of my favorites.