Joined Nov 11, 2007
1,458 Blog Posts

Position Update: DBA Short


[[DBA]] is my largest single short position. I got short back in March, when it failed to hold the 50 day average. I really like how it is again reversing in that area.

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The Daily Breakout: Cry Baby

Volume across the indexes today was very very slight. I still see no reason to not buy this pullback. Here are 3 interesting charts.







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Expecting a Timid Downside Move

Dow Jones

Every idiot with an Internet connection and chart software is calling for a pullback here. I see a lot of you are talking as if you are loading up on shorts. I think it is too early for that.

You may recall last week when I said I’d be a buyer if the indexes weathered the jobs report, hit resistance, and pulled back in low volume. Last night I mentioned the probability that today would see some weakness in light volume. Since everything seems to be unfolding as I have expected, I’m comfortable staying long, although I may buy a little of the inverse etfs to hold for a couple of days.


So everyone sees downside ahead, but I haven’t seen anyone throw up any targets. I’m looking for a downside move to take us back to the 50 day average. For the Dow Jones, this move may shave off 300 points or so. The Nasdaq may see 60 points get harvested.


Basically, it is simple. If you got excited last week, and wanted to go “all in,” but had the good sense and mental fortitude to not buy an overbought market, the next few days is when you want to be a buyer. Man up, and buy some weakness.

Of course, as I have also outlined many times, I think negative earnings reports will send the markets back to new lows, eventually. Thus, there is always the possibility that there is a report on the horizon that will cause the bulls to panic and the bears to regain control. It may be tomorrow. Until that happens, or the indexes do not find support near the 50 day, the bulls have the ball.

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VIX Resting On Trendline


With the Plunge Protection Team bankrolling the banks, the fear of a catastrophic failure in the financial sector has diminished greatly. Thus, fear has dissipated like the black hairs of Bernanke’s beard, and volatility has decreased. Accordingly, the VIX has pulled back to a 10-month trendline.

My hunch is that the markets will have a couple of low-volume retracement days, likely starting tomorrow, and that the VIX will stay above the trendline. However, my suspicions are that the VIX will break the long trend, and that it will be several weeks before we see volatility increasing. I believe that earnings reports will have a dampening effect on the latest bull chorus, and volatility will rise with renewed fears of an economic slowdown.

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The Daily Breakout: Go Long Libido


 This is the kind of chart that makes me want to go long on the open.

Also, who would not want to be long a company [[VVUS]] who makes a product that increases the libido of women?

Read about it here.


I know nothing about [[CPL]]. I included it as it shows a beautiful Cup-with-Handle breakout.

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Market Internals Improve, Poised to Continue Rally

Some of you may have heard Danny talking about his iBC Machine. At first, like most of you, I was sceptical. In fact, I thought he was joking. I spent over an hour last night on the phone with him while he walked me through how to use it. I can promise you I am no longer a sceptic and it is definitely not a joke. While I will not disclose exactly how it works, the simplest definition is that it is a measure of the market internals.

Tonight’s reading on this iBC machine is bullish. When the indexes reached the levels of today’s close in January and February, the internals, as measured by the machine, were much worse. So what does all this mean? In the past, the market did not have the fortitude to go higher from this level. What has changed is that now the market has an underlying strength not seen in months and is poised to break through resistance.

Dow April 3, 2008

The wild card is the Non-Farm Payroll Report, due to be released tomorrow at 8:30 a.m. I am sure the number will be negative. Bloomberg has the consensus as -50K. However, I feel strongly that if the number is not Armageddon awful, the markets will rally again. I think both the Dow Jones and the S&P stand a good chance of breaking through resistance which has held for the past 3 months.

SPY April 3, 2008

While the SPY and Nasdaq are overbought, it is still very possible for the indexes to stay in this overbought situation for a few days. Keep in mind they stayed oversold for 3-4 days before rallying, on the way down. The fact that indexes have stayed near overbought, after a 400 point Dow rally, should not be ignored.

All the indicators are in momo mode, with the MACD trying to make new highs, and the Stochs ready to flatline in the overbought area.

Today, I bought a little [[PTEC]] and some [[POWL]]. I am also long [[WB]] and [[MBRK]]. I am still waiting for some kind of pullback in the Health Care reits, which I hope comes soon.

I am still short [[DBA]] and long [[SKF]].

Good luck to all tomorrow. Tomorrow’s trading may turn out to be a non-event, but my intuition says it could be very volatile, in either direction.

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The Daily Breakout: HCN, POWL, and CHD


Another Health Care Reit: [[HCN]]. Within this sector, you also want to watch breakouts in [[NHI]] and [[HCP]].


[[POWL]] is up more than 4% on killer volume. Chart looks to have a lot more upside.


[[CHD]] is most famous for their Trojan Brand condoms. Great volume on this breakout from a triangle.

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