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.

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.

A Chart a Day #15: ISRG Squeeze!

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

A Chart a Day #13: Lululemon Breakout! (LULU)

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 #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.

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...

• if GM is bankrupt, why is this a ~$1 stock?
• when GM exits bankruptcy tomorrow, is this the new co?
• why is the sept. $1 call trading for $0.13?
• wtf?

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...