Thursday, July 30, 2009

A Chart a Day #17: The Nasdaq Composite Weekly

Looks like a pretty convincing sell to me on this long term time frame. Note that if you use a logarithmic price scale, as I normally do, then the Nasdaq would have a little further to run before hitting the trendline that it hit on this linear chart. I did the linear chart because everyone seems to be talking about this chart and the trendline touch today only happened on this scaling. I think its a pretty low risk area to be scaling into shorts regardless, tech or otherwise.

Disclosure: I shorted TYH today, as a long term position.

Wednesday, July 29, 2009

A Chart a Day #16: DJIA % from 200 dma


Today's chart is actually completely unorginial, I borrowed it from bloomberg.com. I hope they don't mind. Aparently, the Dow Jones has only rallied from being down 10% to being up 10% from it's 200 dma a few times in the last century. Since 1921, the Dow Jones has done this only 21 one times but they have all led to profits over the following 12 months for an average of 18%. The chart above shows the last four times this has happened. I guess we can officially put this signal to the test starting July 2009! Again, I got this chart from here and this link has more detailed information.

Bubblicious

Monday, July 27, 2009

Saturday, July 25, 2009

Thursday, July 23, 2009

Inverted H&S on the S&P 500, nothing but air overhead. Or.... (weekly)

Chart a Day #14 Direxian Tech 3x Bull Bubble (TYH)

I'm gonna call this "tech bubble 3.0," which follows 1.0 in 2000 and 2.0 in 2007. As I pointed out a few days ago, valuations are at the highest levels they have ever been in history. We have a fed fueled bubble in the entire stock market but especially in tech stocks! I think this Direxian 3x really argues this point well since everyone uses insane leverage these days. I tried to short the TYH today but my broker could not locate shares. I started shorting FAS instead and sold my SPY calls. There's more to be said about this but I have to run.



Disclosure: I am short AAPL

Monday, July 20, 2009

Trailing One Year S&P 500 P/E Ratio: About 2000

No joke here, the S&P 500 one year trailing price to earnings ratio was actually about 1912 on 06/30/2009. Because the losses in the 4th quarter (of 2008) were so huge, the total earnings for the S&P 500 for the past year is extremely low relative to the current S&P price, especially now that this total no longer includes the first part of 2008. When you divide the 06/30/09 S&P price (919)(its even higher now) by the second quarter (2009) earnings you get an abnormally large number for the PE ratio. I first saw a PE of 134 quoted by reddit today from this page of the Standard & Poors website, and I was thinking holy shit, really? So I looked into it and I found this spreadsheet that gives the historical S&P PE from 12/31/1936 until 12/31/2008 and added in the more recent data from this S&P spreadsheet to get my plot:

Yep, that's completely accurate and note that I left out the most recent data point (1912 on 06/30/09) because it would ruin the scaling. Click here for a copy of the appended S&P spreadsheet, all I did was take PE quotes directly from the S&P website. In fact, according to the Standard & Poors, the trailing 1 yr PE is projected to go negative in the quarter ending 09/30/2009! Ok, the headline number (1912) is partially based on estimated earnings for the most recent quarter since not all companies have reported, but frankly, it doesn't matter that much because the PE is so ridiculously large. If the PE is really 1500 or really 2500, does it make all that much difference? Its a massive stock market bubble any way you slice it. Compare this to the historic highs of the dot com bubble (~50) or any other bubble and its way, way, way higher. If you want to work out the details on your own, start here and please let me know what you figure out.

I am appalled that anyone would actually try and justify this rally based on value when its clear that fundamental analysis is completely worthless in this market. I think the markets can go higher but I sure feel sorry for those sorry bastards who buy stocks anywhere near here for the long term. Please note that I still expect a substantial move higher in price from here before this bubble pops. Recall that the Nasdaq broke out last week and notice that the S&P came pretty close today.

This is posted on reddit here.

A Chart a Day #11: Las Vegas Sands (LVS) H&S

I thought about posting a daily LVS chart this weekend because it looked great (hat tip to jf in Chicago) and I wish I had because it surged 15% today. The shorter term chart (which I'm not posting tonight) shows that LVS recently retook its flattening 200 dma for the first time since 2007. That's a big deal in my book to compound bullish signals from a golden cross and a bull flag pattern that seems to be completing. Instead I have the three year weekly chart above which looks like a stock that stared death in the face and said go f--- yourself. The volume at the low clearly suggests capitulation and you can see the significance of this base by noting the volume by price (left hand side). What I like most about this chart is the inverted head and shoulders, the scale of that thing is insane but the price target seems completely reasonable to me. If LVS takes out $15 then this pattern targets $30 which looks like a pivot point. That's a cool 100% from the neckline, but a whopping 2,070% gain from the all time low made back in March. Yowsa!

Sunday, July 19, 2009

A Chart a Day #10: Natural Gas Continuous Contract

I'm gonna be boring and post pretty much the same chart I did yesterday for today, but there is good reason why I'm doing it. I think its important to note that an ETF chart can look significantly different from the underlying. Maybe even different enough to change your conclusions from the technical analysis. In my personal opinion, this natural gas continuous contract chart below doesn't change my expectation that nat gas prices will continue falling and take out the recent lows but it definitely looks a lot more healthy (bullish) than the UNG chart I posted yesterday.

The UNG chart from yesterday clearly shows a resumption of the long term downtrend since UNG made new multi year lows recently. On the other hand, the continuous contract pretty much held the low made back in April. Additionally, the 50 dma is much more flat on the continuous contract. I think that its fair to say that ETFs will always look more bearish than their underlying equity, whether thats futures or stocks or options, just because of fees and inefficiencies in the securitization mechanism. This is now famously, and extremely true in the case of leveraged ETFs like the Direxian Funds and the Proshares Ultras. There's not much else I wanted to say about this that a glance at these two charts won't tell you. My gut tells me that natural gas still needs to wipe out a ton of bottom fishers before it will be ready to begin a new bull market. I expect and hope that this will happen with price action but it could very well be the case that nat gas just sits in a narrow range and bores people out of the trade (and kills options via time decay). I also see divergences on all the indicators that I follow even on the continuous contract. Note how natural gas has matching highs in May and June while the RSI, CCI and stochastics all made obviously lower highs. I also don't like Friday's candle at all. It seems like you couldn't go wrong averaging in for the long haul but personally I'm waiting for you know what before I try getting long again (capitulation).

Friday, July 17, 2009

America's Bankrupt Banks


This is the first part of a six of an hour long show about the meltdown. If you liked this part you can find the rest the clips here. Hat tip to a Chicago for pointing these out.

A Chart a Day #8: VIX: Increasingly Relaxed Markets

Thursday, July 16, 2009

Wednesday, July 15, 2009

A Chart a Day #6: The S&P 500

As I pointed out a few weeks ago, the market is acting very bullish. The S&P 500 repeatedly has found support at it's 200 dma, albeit a declining moving average. None of us beleived that the market could really form a v-bottom, but hell, there it is. Plain as day! The short and intermediate terms are clearly bullish and you could make a strong argument that a new bull market has begun (in the long term). I won't do that, because the notion is absurd to me, but I could after the S&P breaks 956, without much difficulty. Today was obviously a strong day, with all the major moving averages up about 3%. This confirms my suspician that the S&P will make a run for 1000 or more. Take a look at the stochastics and CCI, they look almost identical to how they did just after the March lows.

So am I long? Do I want to be long? No. But I am licking my chops for a tremendous opportuntiy to sell into strength soon. The biggest moves for a trend tend to be at the begining and end. Thats because most trends begin and end with capitulation, which I'll loosely define as an extreme movement in price acompanied by a surge in volume. I am looking for those valiant shorts who held true to capitulate, along with all those sorry bastards who have been too scared to get long but wanted to. They'll all buy at some point surging the indexes and the volume too. Thats when I want to get short, and stay short for a while. I don't have a crystal ball or anything, but I have a feeling that it will be obvious when the time is right. Don't be trigger happy and may the force be with you.

Tuesday, July 14, 2009

Ok, I couldn't resist... I unveil the Goldmanfinger





A Chart a Day #5: Goldman Sachs (GS)

I know what you're thinking; "he's gonna go on a rant about how Goldman runs the US government, scams the taxpayer, creates bubbles, etc, etc." Well, you'd be thinking wrong because I'm not going to call Goldman a vampire squid, or harp on how people are pissed that they profit huge while America wastes away. Nope, I'm just gonna post a chart, cause thats all that matters if you want to make money in stocks.

On this three year chart, weekly time frame, I see a massice head and shoulders top which completed about a year ago. Within months the target had been met, a staggering 66% decline from the neckline. I see that GS has since recovered all of that loss and now is finding resistance at the neckline. While expected resistance is being felt at the $150 neckline, the chart remains bullish. There is a solid up channel in place that GS currently lies near the middle of, the 50 dma is above the 200 dma and both are rising. About the only negative thing I have to say about the GS chart is that volume has declined on this rally. Agressive traders might try to make a move near the $150 pivot, playing a breakout above or trying to swing it lower. Personally, I wouldn't bet against GS unless that upchannel broke on a surge in volume and given the overhead supply I wouldn't go long either. But thats me.

Monday, July 13, 2009

The Fed Under Fire


No chart tonight, I got bogged down with some other things. Instead, I hope you'll enjoy this video about the Federal Reserve and I hope you will continue to support Dr. Paul's bill to have them audited. This is a major issue that needs to get more national attention. I found this video in this article that you might also enjoy.

Sunday, July 12, 2009

Saturday, July 11, 2009

A Chart a Day #3: United Breaks Charts (UAUA)

If you're like me then anytime you hear news about a company (or watch a cheesy viral youtube video about it) you wonder what the chart looks like. The "fundamentals" or the news is always secondary to the chart. Obviously, United breaking some dude's guitar is not exactly bankrupting news but just the mention of United makes me think "I wonder what that pos stock chart looks like." And sure enough, there always something interesting in the charts of crap companies like United (bankrupted just 5yrs ago). The first thing that catches my eye is the scale of the three year chart. Last year UAUA staged a 470% rally in less than two months! Of course it gave that all up, but it was a nice looking "v-bottom" while it lasted. So thats what "v-bottoms" look like, cool, I'll have to write that one down. I don't really have a clue what UAUA will do in the short run, it could collapse through multi-year lows or rally back up into the triangle. Long term this stock has bankruptcy written all over it, compare it to any competitor.

Saturday Rock Blog: United Breaks Guitars

Friday, July 10, 2009

A Chart a Day #2: Fibonacci on ICE

Long time readers know ICE has always been want of my favorite stocks to watch. Yeah, the IPO was on my birthday but thats not why I like it so much. I like it because it moves. Well that and they seem to have a pretty solid business model, and I like a nice bedtime story to go with my charts.

ICE worked on a base for many months between $50 and $85 before breaking out early this year. It broke out and had sported a very nice, innocent looking, up channel for about six months until last Monday when.. WHAM! ICE lost 23% in two trading days. It simultaneously broke the up channel and lost it's upsloping 50 dma on well above average volume. CCI watchers were on there toes after it crossed zero last week, way to go guys. ICE seems to have found support at the top of the base ($85) which also turns out to be the 50% retrace of this year's rally.

Now if you ask me, I'd say ICE is not done dropping yet, in the near term. Today ICE closed below that key $85 level after holding it the past two days. Also, the 200 dma and the 62% fibonacci lie not too far below at $79.67 and $77.29 respectively. Given today's weakness and how obvious the $85 support is, I'd bet ICE sees at least $80 if not a few bucks lower before bouncing. After the bounce, bulls better re-take and hold $85 or the cracking ice just might melt.


Thursday, July 09, 2009

A Chart a Day #1: GMGMQ (Gov Moto) and CIT

I've been slacking on posting charts here lately, sorry about that. So to try and make up for it, I've decided to post a chart a day for at least the next week. Things are starting to get interesting for the first time in a while from a technical standpoint, so I don't expect to have any trouble finding charts. I'll post some nice breakouts, some common big patterns I'm seeing, and some charts of stocks with news. The usual stuff I guess. Tonight I've got two to kick it off.

First is GMGMQ, which is the new ticker for the bankrupted Government Motors. All I have are questions about this one...

Next I've got CIT "group," which also has that zombie look. The CIT chart below is on a much longer time frame, a three year with weekly candles (as opposed to the sixmonth, daily above). You can see that $1.65 has been an area of support for the past nine months or so after a multi year decline. Well today CIT got some bad news from the FDIC and its trading below that *key* level in the after hours.

You couldn't pay me to touch this stock, but agressive traders might try and short it at or above that key level. Although given the news, it might not ever see $1.65 again. On the other hand, I would have said the same thing about GM...

Former Treasury Secretary: "Bailouts are a fraud," Geithner "works for Goldman Sachs"

Sunday, July 05, 2009

Wednesday, July 01, 2009

Gangsta' Government


Hat to my mom.