Sunday, March 29, 2009

Year to Date 2009 Returns

There has been alot of talk lately about how some sectors and certain stocks have gains for 2009. Most of this talk centers around the nasdaq which was up .63% as of Thursday's close although after Friday's rout it now sits -2% for the year. Here I'm just gonna throw up a number of different charts highlighting the range of 2009 results for various index etfs and individual stocks. In each of these charts the blue line is horizontal from the close of 2008 and the purple line is some sort of trend I see in the lows. I should note that some of these are 3 month charts while the rest are 6 month charts. Lets start with the ugliest sector ETF, the financials XLF:


(click to enlarge)

The financials are down about 33% this year and I think the important level that needs to break before a test of the years highs is $9.50.

However, looking at the Nasdaq 100 (ticker QQQQ) over the past six months you can see certainly see some signs of a bottom. The 2008 lows have held, plus some change and the index is up in 2009. That being said, the majority of the gains in 2009 were on the first trading day of the year and this index has failed to take out the highs made early this year. I think $31.50 will be a key level to watch:


ICE is a stock which is sort of a tech-financial, and they are right on breakeven for the year. I will give ICE credit for a higher low this year but the longer term tendency to make lower highs below a falling 200 dma remains. If ICE could make new highs for '09 and take out that 200 dma I could be bullish, but until then this one looks like a great short. Recently it tried to break it's 200 dma and failed, that too me is a bearish sign and a suggests a short entry here:


Going back toward the pure technology stocks, GOOG is solidly up for thi s year. Only at a few times has it been in the red and those lows were progressively higher. With a rising 50 dma below this might be one of the better charts I've seen lately. If I were looking to be bullish on something I might choose GOOG after a pullback:


Before we get too excited about GOOG, I should also note that it is still very far from it's 2009 high at $381. So google is up 10% in 2009, but its down 10% from it's yearly high. Furthermore, that pesky declining 200 dma is much higher.

First Solar (ticker FSLR) is another decent looking tech stock. You can see that it's up for 2009 although most of that gain came on the first day of the year. FSLR has a nice looking base formation and I think that the recent cup n handle could take it higher int he context of a strong stock market:


I'll leave you with my favorite index ETF to watch, the Russell 200 small caps (ticker IWM). Its down for the year and in my opinion headed decisively lower:


Any thoughts on these, additional charts (links) are welcome in the comments.

Disclosure: I own QQQQ puts.

Saturday, March 28, 2009

Saturday Rock Blog: Big Empty or Bull vs Bear


I saw a funny article on Bloomberg this morning headlined "Asian Stocks Rise as Index Enters Bull Market." If its not laughable its outright ridiculous that Bloomberg would make a call like this given the chart. The thing is, you only can really say a market is in a bull market or a bear market with certainty well after the thing really begins (6 months+). Its one of those things that far in hindsight is obvious but usually much of the decline has happened by that point. Sure, a market technician might come out and make a call on it based on some evidence they see in the chart, but its purely speculative until you're deep into the trend. In my first post of 2008 I declared that the (market leading) small caps had entered a bear market after making a significant lower low below a declining 200 day moving average. The small caps then declined more than 50% from that level as it turned out that I was right, but at the time it was pretty speculative. I wasn't exactly posting to the front page of Bloomberg.com either. Right now or even six months ago it would be obvious enough to say that yes, in fact, the small caps were in a bear market. But for Bloomberg to start saying that stuff is in a bull market here is crazy talk and it sure makes them look stupid. Here's the Chinese stock market:

Not even remotely long term bullish right? In that article they say that the Chinese stock market has entered a bull market because the "MSCI Asia Pacific Index has rallied 21 percent from a five-year low on March 9, technically entering a bull market." A 20% rally, that's their definition of a bull market? lol. The chart I have above isn't the MSCI index, but it is a China stock market etf (ticker FXI) so bear with me here. The FXI has had two other larger rallies since the all time high that were much greater than +20%, does that mean China is in its third bull market since the 2007 peak? It sounds kinda silly for them to call the Chinese stock market a bull based on a 20% rally given that the FXI is still down 60% from its all time high less than two years ago which means it will take more than a 100% gain to get to new highs. To give some credit to the Chinese, the FXI has made a clear series of higher lows and the 50 dma has turned up. However, the FXI has not made a series of higher highs and the declining 200 dma still lies above.

So how should we define bull vs bear market? I like a definition that I heard one time that a bear market is "a series of lower highs and lower lows below a declining 200 dma." It takes a long time for the 200 dma to start declining and the turn can often coincide with the break of a significant low (support). But like much of technical analysis, calling a bear market or a bull market is more art than science. Its one of those things where it might be obvious if you look at the long term chart, but it might be hard to define why you feel that way. That's why its ridiculous for Bloomberg to say that China is in a bull market today and why Doug Kass is an idiot for calling THE bottom in US stocks repeatedly over the past few weeks. They both will look like fools if they are wrong, but unfortunately they both look like gods if they get lucky.

Here's the S&P 500 weekly chart, does this look like a bull market to you? Be careful what you believe in the media.

Disclosure: I own puts on a number of equities including SPY.

Sunday, March 22, 2009

Licking my chops, is it time to short everything?

Tonight I just have a few quick bearish looking charts for you. To be honest there's not a whole lot that looks bullish on longer term time frames right now except maybe gold. So here are a few things I was looking at. First is LTM, which is one of betweenthebars' favorite shorts right now. To me this looks better the closer you could get in it to $11.50:

With LTM I'd turn pretty bullish on it if the rising wedge broke to the upside. That being said, I'd bet it tests the lower end near $7 first. Of course btb expects it to go much lower, it sounds like.

Apple isnt too terribly exciting, being range bound for roughly 6 months. But tomorrow the bears are going to get a big squeeze on the toxic-bank-subsidy/Geithner plan (I suspect and futures confirm). That could very well take AAPL above the recent highs near $103 which would be a technical breakout and could potentially propel AAPL even higher. It seems like a nice short opportunity if it can reach $105-$110 ish:

Picking a stop on that one would be tough so I would rely on a clear intraday reversal and set the stop at the high of the day (hod). If AAPL broke out and returned into the channel, then I'd expect it to test the lower end quick ($85).

CPF is a financial that I found by accident tonight attempting to bring up the COF chart (which is also bearish but not as pretty). Anyways, I like how this stock has consistently found resistance at the falling 50 dma during this decline:

Watch for resistance at $6.25 and on the way down $5.50 should be a key level for CPF. Every indication is that this thing is accelerating downwards in the long term but the options are illiquid and the float is small.

If I were looking for a financial to short, I'd look for one that has had the largest move up in recent months. That one has to be Morgan Stanley which rallied 300% since its multi year low last October:

MS seems like a gift from god anywhere near its 200 dma, currently at $25. It hasn't actually broken down out of it's up channel yet, but the stochastics and CCI are screaming sell. I see a lot of price in between the November low and the current level.

It really seems like everything is a sell these days, check out the Euro (FXE or $XDE):

I'm not ready to jump in this just yet, but if it gets closer to that declining 200 dma... Licking my chops..


Disclosure: I have no positions in these*

*yet

Bear images were from corbis.

Come on, Nouriel


Wednesday, March 18, 2009

Beware the inflationary rally

The attention grabbing headlines of the day were about how the fed flew in to save us all buy buying US treasuries and how the stock market reacted with a big rally. Flew in is a good metaphor because it was Helicopter Ben who arrived throwing cash onto Wall Street. I think its more than worth noting that today's rally in stocks was not as strong as the rally in gold or the euro. In other words, the stocks weren't as strong as the dollar was weak. If you priced the S&P in euros it was actually down today:

Here he is:

Same story with the S&P priced in gold, dropped...

Oh, and here he is again:

Now most people price their wealth in dollars and for this to actually mean anything to your account you'd need to be short euro's or short gold. That being said, the purchasing power of the dollar is falling since all the commodities rallied today. I would note that these charts above show some potential for a slightly further rally. That is, technically speaking, stocks could rally a little more and/or the dollar could strengthen a bit in the next few days before the S&P priced in euros/gold charts hit resistance.

Looking at the S&P priced in dollars, I can see three plausible scenarios going forward and since the extended chart arrows is all the rage right now:

My gut would be with the failed breakout reversal since so many are watching this 800 level and expecting/hoping for it to turn there. I'd expect a break of 800 to suck in many longs and stop out many shorts. That might be just what big sellers are waiting for to unload into. That scenario also allows for this week's op ex momentum to continue. We'll see, but I find the breakout and run scenario pretty much ridiculous. Reguarding the printing of cash to buy debt, it seems clear that the federal reserve is about to run this country's economy into the center of the sun.

Disclosure: I own SPY puts

Charlie Rose Panel on AIG with Meredith Whitney


And more Meredith, if you have a crush like me...



Tuesday, March 17, 2009

Crude Oil Market Update 03/17/09


CLJ9 APRIL LIGHT SWEET CRUDE OIL DAILY:
From false breakdown in February to a retest of the neckline of $50.00. We are up $10.00.

CLK9/CLJ9 MAY/APRIL SPREAD DAILY:

Another crushing of the spread as delivery comes near.


CL#F CONTINUOUS LIGHT SWEET CRUDE OIL WEEKLY:

Inverted head and shoulders has held and the market is now testing its neckline of $50.00.



CL#F CONTINUOUS LIGHT SWEET CRUDE OIL MONTHLY:


FRONT GOLD/FRONT CRUDE OIL WEEKLY:


RISK DISCLOSURE: PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. THE RISK OF LOSS IN TRADING FUTURES AND OPTIONS IS SUBSTANTIAL AND SUCH INVESTING IS NOT SUITABLE FOR ALL INVESTORS. AN INVESTOR COULD LOSE MORE THAN THE INITIAL INVESTMENT.

Monday, March 16, 2009

The tidal wave of stock offerings has begun... *updated*

Wynn Resorts announces stock offering

Alcoa (AA) Cuts Dividend By 14c To 3c, Offering $1.1 Billion of Stock

Northeast Utilities launched 15.5M stock offering

Palm boosts stock offering, nets $83.9 million

Simon Property prices 15M share offering at a 8.4% discount

If cash strapped companies continue to go to the market for financing in the wake of economic hardship then stocks could have a very tough time in the years ahead. When companies turn to the stock market as their financier of last resort, an overhead supply of shares is realized by investors. Stock offerings from growing companies that are trying to expand is one thing (Palm might fall into this category), offerings to make up for lost profits is something else all together (Alcoa). That something else is not bullish. I'll be keeping my eyes on the lookout for additional offerings by seemingly sound and stable companies.

Google: "stock offering"

Hat tip to betweenthebars.

Sunday, March 15, 2009

Thursday, March 12, 2009

John Stewart vs Jim Cramer Finals




Dunno, I think that Cramer might have won this round. John Stewart was acting pretty naive about the concept of short selling. I also didn't like how John Stewart kept digging up those little clips from 2006 which really were not that controversial compared with some of the stuff Cramer does on Mad Money. For more laughs, here's Cramer on the Colbert Report:

Tim Geithner on Charlie Rose

Scaling back into shorts here up to $800 on $SPX

Closing above that Nov low was huge for the S&P, I would have expected that level to be heavy resistance. If the market can hold this level early tomorrow, then a quick 50 point pop up to a brick wall at $800. I've started scaling in today positions and I would add higher (near 800) unless the long term trend line in blue is broken. There I'd look for an exit. I am concerned about the VIX divergence over the past six months but I like how cheap puts have become. However, the VIX is starting to look like it could drop a lot more if it doesn't bounce from here. So I'm closely watching the VIX for reasons to stop on SPY. Click on the charts for more detail.


Disclosure: I own SPY and IWM puts.

Tuesday, March 10, 2009

The Daily Show vs CNBC *Updated*





While I think the criticism of Rick Santelli was misplaced, I'm gonna declare John Stewart the hands down winner on this one. Its nauseating how Jim Cramer tries to rewrite the history of his failures but Stewart makes me laugh about it. The Daily Show: 3, CNBS: 0.

Monday, March 09, 2009

The Devil's Advocate or Still in a Steep Down Channel (S&P)


By no means has the recent down trend in the S&P ended, the channel is steep and prices continue to hug the expanding lower Bollinger Band. There was something of a promising rally from the Lucifer low at 666, but we remain within the channel. To play the devil's advocate, the SPX is oversold on the daily stochastics and RSI. Also, there has been bullish divergence in the CCI recently. That is, the daily CCI has moved higher as the SPX made new 12 yr lows. If there is a rally, I would expect it to run into very heavy resistance at the November low around 740. I'm currently hoping for a rally to reload shorts. Good luck!

On a side note, the VIX is still hovering around 50 which makes me think that its going to take time for this down cycle to climax with a long term bottom. For those who are interested in the inverse ETFs I strongly encourage you to read this recent article in Minyanville:

Volatility Decay: A New Kind of Risk

Saturday, March 07, 2009

Wednesday, March 04, 2009

VIX: "No Panic Yet"

As you know, I think we have entered the final phase of the bear market: panic or "the fifth wave." What I'm looking for to declare a bottom is that classic capitulation where volume surges, the VIX explodes (puts explode) and panic is everywhere. Clearly, we are not there yet. The VIX is "chilling out" around 50, where as it reached 90 last October. I want to see the VIX over 70 at least. No worries, no bottom.

Monday, March 02, 2009

Respecting The Channel

ESH9 March Emini SP500 Daily:



$SPX Cash SP500 Monthly

Chart above looks similar to this DJIA chart from 2006, however as history shows, the DJIA did break the highs and rally above 14000 before turning lower.

RISK DISCLOSURE: PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. THE RISK OF LOSS IN TRADING FUTURES AND OPTIONS IS SUBSTANTIAL AND SUCH INVESTING IS NOT SUITABLE FOR ALL INVESTORS. AN INVESTOR COULD LOSE MORE THAN THE INITIAL INVESTMENT.