Saturday, August 30, 2008

Saturday Rock Blog: Crash (ABK Won't Slow Down)



Ambac (ABK) is a stock that readers have known about for some time. I 've been posting about ABK for about a year and it ended up being a great short. After falling to as low as $1.04 in early July, ABK has been squeezing hard to settle around $7 on Friday. The lyrics of this song by The Primitives comes to mind:

"Here you go way to fast
don't slow down you're gonna crash
you should watch - watch your stay here
don't look out you're gonna break your neck"


Can anyone guess in what movie I heard this song last night?

Saturday, August 23, 2008

Saturday Rock Blog: It Don't Come Easy (for oil bulls)



Yesterday's oil bulls are singing this tune today after crude gave back all of Thursday's gains and closed at the low. The bounce from support was far too obvious for that to really be the end of the decline. I'd expect a break of $110 at some point next week followed by panic selling. Thats the capitulation that oil needs before a real move higher in my opinion. However, if crude spends more than a few days below $110 then you can pretty much forget about the bull market in energy. By the way, what happened to the comments and the other authors? This blog is turning into a ghost town.

Wednesday, August 20, 2008

Do or Die for Oil


Earlier this year Oil broke out of a long term, beautifully formed rising wedge. Since that break out crude rallied big then sold off hard and recently returned to the apex of that wedge where the 200 dma also lies. Oil seems to be at a major pivot here, any lower or sideways would mean that breakout had failed and a long term down trend would be in place. I think the more likely scenario would be a continuation of the long term trend upwards off support here. If the world really is going into recession though it would make some sense for oil to go into a bear market with stocks. Looking at the ag commodities, DBA seems to be breaking out of its recent multi-month downtrend and headed back to the upper end of the 2008 range, like it did in June. I'm looking for DBA to retest the highs as inflation picks up speed with falling interest rates world wide.


Disclosure: I own some DBA calls

Saturday, August 16, 2008

Thursday, August 14, 2008

ROTFL



Anyone recognize that guy? I posted briefly about this "top bank analyst" back in July of last year after hearing about his hedge fund "Second Curve Capital" that had been heavily invested in the most toxic of subprime lenders at the very top. As the financials topped and tanked this dude remained very bullish and invested in the likes of NEW (bankrupt), FMB (crushed), LEND (gone), CCRT (new multi year lows today) and others. I thought that CCRT looked like a great short at $34 especially considering "CompuCredit was one of Second Curve's largest holdings at the end of 2006." Guess I figured they'd need to dump it in order to raise capital following bankruptcies in their other holdings. CCRT dropped like a rock and now sits around $5.

Anyways, back on Feb. 27th of 2007 he said: "Given the level of investor panic surrounding the subprime borrower lately, I'm feeling very greedy regarding subprime lenders these days, and am especially greedy over subprime-mortgage lenders. This is one of those times in investing, I believe, when it will pay to be very, very aggressive." He thought it would pay to be aggressively buying sub-prime lenders a year ago!! And now he is calling the bottomagain? ROTFL

Wednesday, August 13, 2008

Saturday, August 09, 2008

One Year: Oil vs Small Caps vs Blue Chips

Its almost the one year anniversary of the all time high in the dow and an important low for oil and I thought it would be interesting to compare these two benchmarks with the small caps. First check out oil, it remains solidly in a long term uptrend. Even with the recent 22% decline in crude prices, oil is up 65% over the last year! Crude has pulled back from it's "super spike" and is getting close to the rising trendline where the rising 200 dma also lies at $110. That level could provide enough support to at least bounce the oversold oil.


The small caps actually look pretty decent. Over the last year the Russel 2000 index is down only 7%, that seems incredible to me with oil having more than doubled and all the global economic problems. I've always said the small caps led the market and they looking strong after closing above the 50 and 200 dma on Friday. On the other hand, the long term downtrend is still in place, look for a trend line test any day now. The small caps had a similar breakout in early June, that failed and led to a brutal selloff.


Of the three, the Dow Jones had the worst one year performance and the ugliest chart by a long shot. The blue chips are down 11% which still seems not so bad given the 115% rise in oil, etc. As you can see below, the Dow is well below its long term trend line and 200 dma but did close above the 50 dma Friday. There seems to be some similarities in the recent rally to the one we had earlier this year. After the Dow broke out of that flag I mentioned yesterday it looks like it wants to test 12k before heading lower again.

On thing that would really make me cautious on the market right now is that the Dow only rallied 7% since oil topped and fell 22%. Investors know oil is still up huge year over year and other issues like crumbling financials and crashing home prices persist. Is oil going to have to drop another 22% just to get the Dow up another 7%? The small caps are the only bastion of strength in the market right now but I have heard that sector experiences the biggest bear market rallies because lower float make finding shares to borrow harder. At any rate, we should know if long term trends are changing soon because trendlines approach.

Saturday Rock Blog: Body Movin'

Friday, August 08, 2008

Beautiful Bear Flags Galore!


I'm just posting the dow jones industrial average tonight but this same pattern appears on the Nasdaq, Russel 2000 small caps and S&P 500. Its a bear flag, pennant, rising wedge continuation, whatever you want to call it, its bearish. How low will we go? See some of my previous posts. The pattern has not completed in price but lookomg at the big volume increase on the dow jones today (above) I think the odds are very good this thing will break down hard later today (Friday). Good luck!

Monday, August 04, 2008

Aussi Dollar Rising Wedge Breakdown

Thats a nice pattern for a weekly ("long term") time frame. The rising wedge is moderately bearish but something I've seen more often on smaller time scales, so I'm not sure how reliable the $78-$86 target range is. I guess you could call this an update to the last post I did on the Australian Dollar (FXA etf). Cheers mates.

Saturday, August 02, 2008

Saturday Rock Blog: Turning Japanese



The Japanese yen is one bearish looking currency. Since peaking in march, the FXY etf has clearly been in a down trending channel and recently had a cross of death (50 dma / 200 dma crossover) on the monthly time frame (not yet on the daily). I wouldn't bet against the yen just yet though. The cross of death is clearly a lagging indicator since it involves the fifty day average price falling below the 200 day average and the FXY CCI crossed zero a long time ago (a leading bearish indicator). If you look closely at the more recent chart action you'll notice FXY has found support repeatedly at $92. If the yen can stay flat or move higher in the coming weeks, say above $96, then a big rally could be in store. On the other hand, if $92 breaks I'd expect the next leg down to begin in earnest. Its also worth noting the well established counter trending nature of the US stock market and the yen. Its time to pay attention to the carry trade again.