Thursday, July 19, 2007

The Rails

I came across a couple of nice looking patterns you may find of interest. Union Pacific, (UNP top chart) one of the current market darlings had a beautiful shooting star yesterday on very heavy volume. I move below yesterdays low of $125.59 would be the signal to go short. Norfolk Southern (NSC 2nd chart from top) and Burlington Northern (BNI last chart) both show the same pattern with corresponding heavy volume. A move below their lows of yesterday would be the trigger. For Norfolk its $57.78 and for Burlington it's $91.87. Could be a top in the rails of some substance only time will tell. For those interested Norfolk's action today is indicating a bearish engulfing bar which is very negative.

Yesterdays rally in the markets from the depths of despair will give the conspiratorialists out there more fodder for discussion. Do I believe the plunge protection team exists, well I am not naive enough to believe that they don't. If the government will print money like drunken sailors are we to believe they would not buy a few futures contracts with the phuny muny. In the end a far wiser trader than I could ever be, who I communicate with often told me there are more fruitful uses to expend my mental capital on, to which I wholly agree. Whether they are or aren't we have to analyse the tape and leave discussion on the PPT to others more connected.
The yen continues to consolidate down here with the battle lines at 82 clearly evident. If we can make a meaningful move thru here the implications cannot be overstated as the Yen carry trade is almost as popular with the 'smart money' crowd as the CDO and CDS garbage they are all hiding on their books. Remember the more sophisticated it is the more they will like it. This is so they can tell everyone how much sweat, hard work and street smarts it took to make the trades in the hedge fund daddy and associates seeded them with. The reality is these guys and gals trade in similar fashion to where they dine, live and socialize, the hot spot, where EVERYONE else is of course! Just lemming following lemming to the trade of the day. Makes that Ivy league degree the trust fund bought real valuable. The volume on FXY was encouraging but we need to clear this hurdle or another down draft is a distinct reality. Good luck and good trading to you.

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