Tuesday, July 10, 2007

Charts of some Interest

I had said 165 was important on SHLD (bottom chart). Well today we are finding out how much as Sears has gapped down thru it. Gaps are extremely important and most of the Shld bulls will be rationalizing the gap away as meaningless. (they could have the courtesy to try to explain it as an exhaustion gap but I doubt this as it has not occurred after a protracted decline). Some tech stocks exhibited gaps down following their meteoric rises only to be ignored and even worse viewed as buying opportunities. Be careful that this is not Nortel (chart 2nd from bottom) part deux ! Ignoring trend lines being broken and gaps down at your own peril. The charts don't lie, they can fib for a while but they don't lie. I would like to hear the water cooler talk at SAC today!

COF - This one may be suffering from all the acquisition indigestion of the last few years. A nice rounding top currently in progress is clearly visible on the 10year chart (4th rom top). This action is coinciding with a watershed shift in the bond market from bull to bear spells bad news for the complacent long term bank stock investors. The 3year chart (3rd from top) shows that $69 in particular should be watched as a break of this level opens the floodgates to some signifcant downside.

Gold weekly - looks constructive as it held the 40 week MA. The daily chart shows it holding its 200 day as it fights to regain the 50. We are not out of the woods as we need a move thru $69 to signify a higher high

Crude - at some point crude will act as a 2x4 across the forehead of the stock market bulls they can rationalize it any way they want but rising crude is not bullish for the economy especially one as precariously perched as this one. Next stop, $80 and we'll re-evaluate at that time.

Rating agencies (Moodys, Fitch, etc)- S&P is downgrading 12 billion in subprime paper. Nothing like locking the barn after the horses are gone. What can one say about this spineless group of charlatans that has not already been uttered. They are possibly one step up on financial cess pool food chain from the major houses like Bear, Goldman, etc.

Inflation is at all times a monetary phenomenon. That's it, end of discussion. The top chart shows money supply in particular M3. You can draw your own conclusions as to why the government stopped publishing the data. If you don't have to look at it anymore that means it doesn't exist. My guess is the charts are worse for other countries like Japan, China, etc. and the King of the them all Zimbabwe, the former breadbasket of Africa now the poster child of government orchestrated horror aided and abetted by the IMF. Good luck and good trading to you.

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