Joined Nov 11, 2007
1,458 Blog Posts

Dow Jones Breaks Above 50 Day Average

Dow Jones March 18, 2008

The Dow Jones average is once again gunning for a congestion area. It is closing in on its downtrend line and is not far beneath a horizontal line of resistance. 12750 should be watched closely for a reaction. Also, the bulls need the Dow to maintain the 50 day average.

A trend following and trading range setup would have one get short around 12750.

I will become cautiously bullish should the Dow test and hold the 50 day. The Dow has been the strongest of the indexes.

SPY March 18, 2008

The SPY is still floating beneath its 50 day average and a falling line of resistance. This resistance must be broken.

Nasdaq March 18, 2008

The Nasdaq is still in need of some repair. 2330 looks like a good place to watch for a reaction. That area will get the bulls above resistance and the 50 day average.

I am still bearish. I do not believe there will be enough cash committed to push the markets through resistance. I do not think that enough investors truly believe this to be the bottom.

However, it will be all I can do to not buy some stocks tomorrow for a swing trade. I may just add to my [[MBRK]], and try and sit the rest of the week out. 

I am damn tired of shorting. Lately, short profits must be harvested intra-day, and that has been difficult for me to do.

One important note: If this turns out to be the bottom, I will never ever short stocks again. The government seems to want to ensure that I can stay fully invested all the time and never see greater than a ~15% drawdown.

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Do Not Try To Get Cute

There is likely to be wild gyrations in the market today, and intervention in either the equity or Forex markets or both is highly probable. Therefore, throw your indicators, trend lines, support/resistance out the window. If things really start to get bad, none of that will matter. Just as soon as you get your shorts on, Bernanke is going to throw you a knuckle ball. And no, you can’t hit a knuckle ball.

There is a lot of fear, uncertainty, and doubt right now, and it is not likely to get worked out in one trading day.

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Take Time Out for Some Culture

While I have not discussed it much on the blog, I have spent part of my life living as a semi-professional musician. In 2002, I  was in a guitar store trying out some Martin Guitars. There was a younger guy in the pickin’ room, and we played a few songs together. We seemed to click, and so we exchanged phone numbers. We ended up developing a great musical relationship which progressed from late night jams at home to gigs in bars in Richmond.

This fellows name is Kagey Parrish. He was in college when we met, and he became involved romantically with a girl named Laura Wortman. She sang like a bird and played guitar well, so they seemed a natural match. Plus, she was young and smart and easy on the eyes.

As time went on, we all played gigs together, and I made some recordings of them in my home studio. Their harmonies, musicianship, and song writing skills were developing at a rapid pace. It has always been a real pleasure to play with these folks. In order to find a town which is better sutied to their style of music, they recently moved from Richmond to Charlottesville. It has been tough on me because I miss them as friends and because it is hard to find people to play music with who possess their level of talent.

They recently entered Garrison Keillor’s Praire Home Companion Talented 20s contest. If you are not familiar with the radio show, which is syndicated nationally on National Public Radio, then you have been missing out on a true piece of Americana, the way it used to was. Kagey tells me that they sent Garrison one of the recordings I made of them in my home studio. They were one of six acts selected out of a thousand entries.

You can read about some of their competition here.

Kagey and Laura, now known as The Honey Dewdrops, played live on the radio show this evening, AND THEY WON THE CONTEST!!!

This is an enormous deal, and will likely open up many opportunities for them. I cannot tell you how thrilled I am for them as they are genuine, humble people who have truly earned this break. Not many people in this world get such an opportunity to fulfill their dreams.

Please take the time to stop by their myspace page The Honey Dewdrops to listen to their songs, tell them congratulations, and that Woodshedder sent you.

Thank you for taking some time out for culture.

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Position Update: Middlebrook Pharmaceuticals MBRK

With the exception of a point and some change loss on a portion of my [[UYG]], the rest of my all-in bounce trade was profit, save for a few pennies slippage on my break-even stops. All things considered, I’m pleased.

While I’m posting about my actual trades, I wanted to update on [[MBRK]].


I bought 1/4 of a position @ $3.55 on the day of the green arrow. I sold half of that @ $4.15 on the day of the red arrow. My goal is to hold onto winners as long as possible. Accordingly, I should not have sold even half, but I did, due to the general market weakness.

My rules have me start with a small position, and then add to that position on the first pullback, as long as my breakeven stop does not get hit. It seems the pullback has occurred, and my stop was narrowly avoided. According to my plan, I will now add to this position. As the stock is consolidating above a previous spike and riding up the 20 day average, I like this spot to add shares. Tomorrow I will buy enough to bring my total position up to half of my final projected position size.

As for the Chaikin Money Flow, it is not an indicator I typically use, but it looks so damn bullish, I included it for the hell of it.

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