Monday, July 16, 2007

Charts of Interest

Dow Okay, okay first it was a double top, then it was a triple top, what next bozo. There, I fessed up. Being wrong is a big part of being in this business. Being able to admit you are wrong well, that's the mark of a real trader. Just ask Nick Leeson from Barings or Brian Hunter from Amaranth, but then again it wasn't their dough on the line, just playing with OPM (other people's money)

The break out on the Dow which I am watching thru the diamonds (last chart) was volume suspect. I am not making excuses but a breakout of that magnitude should have seen block buster volume. Lets just say I am unimpressed and am not trading it long. Those perma-bull souls are looking good but better not drink too much of the Larry Kudlow kool-aid and lose their objectivity. This could be a deak out, or a 2B move as Victor Sperandeo calls em'.

I hope $136.50 holds for ya bulls because thru $136 I will be nibblin' short. The financials should be leading and they are not and until they are this rally is suspect, couple that with what I have outlined (as many others have) in the bonds, along with what I see in the yen and crude and basically its not a foundation I would lay may house on(full disclosure I rent). I couldn't resist throwing in the housing analogy given my affection of that toxic arena, which is spreading to the Alt-A arena as we speak.

Sears (SHLD 3rd chart from top) has a very nice low volume flag forming here. Trap door dead ahead. As they say in the tubes, mind the gap! Eddie Lampert is a balzy trader, but there is nothing he can do. The charts are the charts and they don't discriminate. A break of $155 and 152.65. should do the trick. Simple yet elegant I think.

I came across an interesting chart over the weekend (RATE 2nd chart top of page) I think it could be a double top (not a typo), especially given housing and my bond market call. Looks like a low risk entry area with stops into new high territory. My friend Dennis Gartman repeated advises traders to put their rocks in the wettest sacks and this one is not exactly wet, more like bone dry. But the chart screams potential double top here. (notwithstanding my Dow double top call!)

Natural Gas ($NATGAS chart at top) is in the midst of a large consolidation pattern between $6 and 9. The daily chart shows some short term divergences that are worth watching here. You can play this via the U.S. Natural Gas fund (UNG) or as I like to via NGS which is retracing back to the breakout and is in buy territory again. NGS is also a nice rounding bottom on the weekly for those that watch those charts.
Before I forget crude has had a 7 handle on it for almost 2 weeks now and it gets brushed aside by the media next to resale tails or rather retail sales. Remember, crude is and most definitely will be a 2X4 across the forehead of this stock market. CNBC casually mentions it as if its a good thing for equities which its is NOT !! Good luck and good trading.

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