Thursday, August 30, 2007

Some charts.... some thoughts.

The above chart is of the Mexico ishares. The jewel of Pemex is Cantarell and it is in decline not to mention disrepair, unless you believe government, any government but in this case Mexican, does things better than the private sector, suffice to say this blogger has his doubts. If you think the U.S. has an immigration problem now, just wait till the Mexican budget problems surface as Pemex is 40-45% of their revenue. I am an ardent supporter of LEGAL immigration in case you were wondering, it is what has and what will continue to make the U.S. great.

The Japan small cap fund shows some deterioration. There are some positive fundamentals coming out of Japan but I worry that with global equities being tied at the hip so to speak that the good fundamentals won't matter.

The Japan ishares (EWJ) above offer a large cap look at Japan . As I said fundamentals are improving and the minute I want to be long this is a market that will be at the top of my list as they should be a major beneficiary of Asian prosperity.

I want to touch on something that bolsters my claim that you should do your own homework and not listen to the shills and charlatans they trot out on television with recommendations and prognostications. I caught a segment on pompom TV (CNBC) this morning in which they had an analyst from Wachovia. In the segment the analyst in question claimed that they have been concerned about housing for a 1.5 - 2 years. Okay, fair enough that's what they claim. Now lets look at their actions. Remember back in Sept of 2006 Wachovia bought major west coast mortgage player Golden West Financial. Now my calendar is as good as anyone else's so that buy was done about a year ago. So let me get this straight, you concerned about the housing market for about the last year and a half to 2 years, yet your company goes out and buys a major mortgage player in one of the if not the hottest markets in the country in spike of those concerns. Do with this what you will I am just bringing the striking contradiction of analysis verses action to your attention.

In other news Basis capital of Australia said its 2nd largest fund hedge fund filed for bankruptcy. Remember this the same Basis that earned the ``Fund of the Year'' title at the 2005 AsiaHedge awards and Macquarie Bank Ltd.'s ``Skilled Manager of the Year'' in 2004. I ask now was it their skill and acumen that garnered the awards or did the rising tide lift their boat. I have mentioned previously that my grandfather always said you don't learn the value/skill of your pilot, skipper or physician till the $%#$% hits the fan. Well, we have our answer regarding Basis which unfortunately is too late for the holders in that bankrupt fund. I think I read somewhere to never confuse brains and a bull market.

Wednesday, August 29, 2007


The word trust as defined by Merriam-Webster;
1 a: assured reliance on the character, ability, strength, or truth of someone or something b: one in which confidence is placed.

I don't know how closely any of you have been following the growing number of stories regarding malfeasance across the financial spectrum. Whether it be the Bear Stearns hedge funds that blew up filing for bankruptcy in the Cayman Islands or the Sentinal situation which gets more intriguing by the day should we be surprised the following article out of the NY Times has emerged. This growing overseas investor discontent deserves your attention as this is no small matter here as this cuts to the integrity of our financial system which is the bedrock of the markets. Investors must feel confident that what they are reading, whether it be a ratings report or a research note, that the product actually is what it says it is. At the end of the day confidence in the financial system must be maintained or it will implode. Kyle Bass from Hayman Capital in this letter to his clients, details some disturbing details of behind the scene goings on in the debt markets. I believe this is and will be a much larger issue for the Fed and the Treasury than propping up markets or maintaining liquidity. If the perception exists, even remotely, that the game is rigged in any way, all hell could break loose. Don't lose site of the fact that these insignificant foreigners are our bankers ! I hope I am making more of a situation than it deserves, but I cannot help thinking of the phrase, it takes a lot of buying to put a market up, it takes a mere lack of buying to put a market down.

These overseas buyers are a major part of the liquidity that everyone wants so desperately to bring back. Dennis Gartman has always said capital gravitates to where it is well treated, to places where it is free to come and go as it pleases. I am trying to look at the source of the infection rather than so many others who are looking at the symptoms. Will you buy a money market fund let alone a debt instrument if you cannot trust it is what it says it is. It is often said that when the tide goes out we see who is wearing no clothes and this disappearing tide of liquidity is exposing some very unpleasant facts about our financial system. When trust disappears in the financial it takes a very long time to come back. Good trading to you all.

Monday, August 27, 2007

Market Thoughts for Monday.

Do you feel better now. Does the lack of volatility have you saying 'boy am I glad I didn't panic'. We have seen this act before folks. You cannot sell into weakness, you must sell into strength. Look at any long term chart of a stock, commodity, or index and you will see what looks like the profile of a mountain. Rising up, the left side, the peak and the falling off, the right side. Now look to the volume. Is it mere coincidence that the volume occurs to the right of the peak. This is the distribution zone, the area where the 'smart money' distributes stock to the 'dumb money'. The average person measures value by how many points off the high tick he is purchasing the stock for. Wow, you say, that stock was $85 and now it's trading at $60, it must be a bargain. It's distinctly possible it may be a bargain, but often times the landscape has changed and many if not all do not see it. I ask again as I did last week, where is the volume? And stop using the everyone is on vacation excuse. They are all in front of their screen, remote or likewise, staying abreast of what is going on.

I came across the following quote from an ABC News article entitled "Real Estate Fool's Gold"

"It was going up so rapidly that I was fearful that if it went any higher I could not afford it anymore," she said. "So I needed to get it while it was still at a price I could afford…before it went out of my range.
"If we don't hurry up and buy something now," she said, "we're never going to be able to buy anything."

A doctoral thesis these could be conducted on the above statement alone. Read the quote again and think about what is being said. I am not trying to pick on the individual who made the statement or their IQ but it speaks to the emotionality of the issue. In broker training school they taught us that 90% of buying decisions are emotional. Hence most try to offer as much sizzle and as little steak as possible. Tops are made amidst euphoria, and exhilaration(think gold in 1980/tech in 2000 and bottoms amidst depression and despair.(think gold/oil in 2000).

The touts on television are going to start downplaying all the negatives on the economy. For example just today a commentator downplayed housing in this market as not as big a deal as the bears are making it out. Now this is an industry that according to very credible sources has been responsible for between 40-45% of all new job creation since 2000 ! Yet now that former evidence doesn't support their continued stance, they downplay the same facts that they rejoiced in previously when it suited them. These are not stupid people, though they may come across that way. Is this hypocrisy, is it bias, or is it ignorance. Whatever it is, it can be an exorbitantly high tuition to pay for learning something the hard way.

Crude Oil - This is economics 101, demand is increasing and supply is decreasing. It is really that simple. All the easy oil has been found. To those that believe that crude is in a bubble which is ready to pop and head back down to $30/barrel. Please provide me with the schematics on how we are going to ramp up production to meet the increasing demand out of the developing world. I know you are gonna tell me that 'the Arabs have it, they will just ramp up production'. Well, I don't operate like a Countrywide or Accredited Home lenders, or any of the other 136 mortgage lenders gone belly up. I need documented proof of reserves, audited proof ! I refuse to take you or especially them at their word because if the average homeowner overstated his income by 50% imagine what a monarchy desperate to maintain its tenuous hold on power would do. Suffice to say an 50% exaggeration may be mild. All that unexplored territory in Iran awash with unexplored reserves, so awash they are rationing gasoline among the citizenry. The Artic and the continental shelf you say, the easy oil has been found. Get used to these prices this is just a consolidation, and lord forbid some serious political strife globally, triple digits ASAP. Sorry, I'm just the messenger so don't shoot me.

Gold - We are getting close but just not yet. Silver the same.

The financials are an absolute joke. I keep seeing the dow up and the financials down or flat, or off their lows for the session. This market is going no where fast without the financials participating. I encourage you to look at the Ultrashort financials (ticker SKF) as a hedge to you long portfolio or an outright short. I hear about all these fund managers buying the financials on weakness. I keep hearing how fabulous these dividends are. I have a news flash for them, (remember news conforms to the tape), dividends can and do get cut when business gets bad. We'll have to see how enamored of financials these cats will be when the dividend is 1.5% Here is an advance headline from Sept 15th, 2007

"Business is go good we just had to borrow another billion or so at the discount window, of course as a show of support for the Fed !"

The breadth of this market stinks, the new high/new low list looks absolutely pathetic, these stock buybacks all done with borrowed money and with the stock price at or near all time highs, yet we are supposed to embrace this as a value market. Save me the rhetoric and give me the Charlie Prince of Citicorp line, "the music is still playing so we have to get up and dance." at least then I could give you credit for being witty. The tape still says down. good trading to you all.

Gateway, Crox and the Perils of Averaging Down.

I heard the news this morning regarding Acer's purchase of Gateway and I just couldn't resist. I am not trying to rub salt in the wounds of Gateway investors (there's that word again). I just thought that if a picture is worth a thousand words then this one has got to be worth at least that if not more. Do you think Pompom television (CNBC) will show you this chart ! NO ! They will tell you that Gateway(GTW) is up $0.60 to a 1.80 up a whopping 50%. Do you not love selective, tout reporting. Just like they are doing to Cisco right now. What is the lesson to be learned here from the 97.8% decline? Was it that maybe the dips were not actually buying opportunities but warnings screaming sell? Or maybe that things really were NOT different this time. Or possible that the analysts had absolutely no clue as to what was going on?

Please look at this chart of Gateway the next time some analyst is on TV touting the latest hot fad like beanie babies, hoola hoops or Crocs. (speaking of which see chart top). The minute things go south they will re-iterate their buy ratings, maintain that this is buying opportunity, blah, blah, blah only to abandon you in the end, leaving YOU holding the bag. The chart above clearly shows the perils of AVERAGING DOWN. Ask the many Gateway holders who averaged down how they feel now about this strategy even with this glorious buyout from Acer. I will repeat here again, losers average their losers. Don't fall into the myth perpetuated by sales and commission driven Wall Street, averaging down is a guaranteed ticket to the poor house. I cannot say it any clearer than that. To the doubters out there of which there are many, I suggested reading up on Nick Leeson from Barings fame for empirical evidence on this issue. Good trading to you all.

Saturday, August 25, 2007

The Fed Bends its Rules

I came across the this article regarding the easing by the Fed of the banking rules which I would encourage you to read. I read it twice to make sure I was hallucinating which, frankly, I wish I was. The Fed is permitting these banks to use 'insured assets' in their brokerage affiliates. The article goes on to state that this was done at the request of the banks ! The equity markets are less than 10% from their all time high ticks and the Federal Reserve is doing this? What am I missing here. Are the credit problems out there much more severe than any of us wish to admit. Dare I say worse than the most pessimistic expectations. This smells like a margin call they cannot meet. Now I may be making this into more than it deserves but I do not see how this can be construed as anything other than a disaster unfolding. I am starting to think that the lines we saw at Countrywide bank may be a harbinger of things to come. Good trading to you all.

Friday, August 24, 2007

Random Thought Friday

The Countrywide/Bank of America deal is a lose-lose situation. Regarding BAC, I know others think this is a sweetheart deal for them and while it may turn out to be I have serious doubts. They are a major player in West Coast real estate and this smells to me like they are averaging down their a losing position and we all now where that leads. (just ask Nick Leeson of Barings, or Metalgescellshaft or better yet, the Nobel laureates over at Long-Term capital). As for Countrywide, well considering the top tick was hit the first minute of trading at $24.45 turned lower and never looked back. What a gift to get out. Hope you CFC longs took it. Gotta have my head examined for not shorting it into that resistance. Just another reminder that the tough trade is the right trade. Congrats to those out there that did get short, my hats off to you ! One last thing, did anyone catch Mozilo's comment when asked if he approached any banks for money he said "they all told me they have their own problems", makes me wonder how big those problems are.

Let me get this straight, Mozilo thinks recession, Goldberg from Thornburg thinks likely a recession. hmmm 2 guys in the field contradicting the ivory tower economists, interesting. But like Gary Shilling has often said predicting a recession is never good for your job security as an economist or analyst, something to think about when listening to these gurus on pompom television.

In many a day prior when the Dow would be up, as it is today, the yen would be down as the hedge fund valets would be playing follow the leader into the carry trade(borrowing and selling yen to buy any other asset). I note the yen is flat to off slightly with the Dow moving as I write this at 2:30 pm EST, we'll see how it closes. I find this a little curious and yes I am long and got longer yesterday. Biased? I hope not. Opposing views are welcome.

Home Depot looks to be having some trouble unloading the supply division deal. By trouble I mean 1.2 billion LESS for the unit. I wonder how this might affect it's stock buyback considering they are doing it with borrowed money. My guess is some bankers are popping Rolaids as we speak.

Someone emailed me regarding my comments on this being a light volume (bear market rally) and not to be trusted. The emailer felt that the summer holidays were to account for the volume drop. To which I say, don't be fooled. Money managers are watching this market very close and while they may indeed be on vacation they are connected via laptop, blackberry, etc. I also suggest that if they are not watching whats going on they may not have something to watch over in short order. Remember, it takes a lot of buying to put a market up, it takes a mere lack o buying to put it down. Good trading to you all.

Thursday, August 23, 2007

The Yen

You must keep your eye on this chart. It is a MAJOR pillar of this market, it is the stalk of the leverage soup that is being unwound. This pullback is healthy and I need to add to my long yen position. We must remember to add to our winners and cut short our losers so that is what I am doing. Good trading to you all.
* This is not to be taken as investment advice as this blog is a diary of my market thoughts and opinions. I am not licensed to give investment advice. Do your own homework when considering any investment. And above all remember the difference between an investor and a speculator is an investor is a speculator who made a mistake and will not own up to it !

Mexico, Japan, Patterson, and Nabors

The above is the Japan small cap fund. It has broken and it makes me wonder if this is a prelude to a break of the EWJ. (3rd chart)

As home to the worlds 3rd richest man do we take this as a sign of the times to exit the party. If you follow Pemex (and its decline) and are familiar with how vitally important it is to Mexico's economic survival you might ask, what's next. The U.S. has the current immigration problem against the above backdrop, now I ask, what happens when or if it turns? Might be worth consideration of speculators as well as policy makers.

Many call this a cheap market but as we all know or should know by now cheap things can get even cheaper. If the Japan small cap fund is any indication (1st chart) this could be in trouble.

Nabors needs to hold here. Nuff said.

Ditto for Patterson.
Remember that often with technical analysis, simple can often be elegant. Good trading to you all.

Thursday Thoughts

I caught the interview of Countrywide's Mozilo on CNBC earlier. Maria did not disappoint with her softball questions though I will give Maria the benefit of the doubt and bet dollars to doughnuts his massive stock sales were an 'interview breaker', she cannot be that shallow.(can she?) As for the irresponsible Merrill Lynch analyst, well, the only thing irresponsible was his waiting this long to move to a sell. My gut tells me he wanted to some time ago but politics and profits at a place like Merrill trump sound analysis and ethics every time. Regarding Mozilo's comments that the Merrill analyst's baseless comments affected thousands of Countrywide employees' lives is a joke. What affected their lives was the absolutely garbage loans he and his loan jockeys pumped out at a dizzying pace. Now the piper has arrived for payment and he is surprised. This deal only delays the inevitable, bankruptcy. You depositors at Countrywide bank, do you hear that? Please govern yourself accordingly.

Coventree could not sell about $400 million in commercial paper. Does this mean the liquidity injections are not working ? Maybe they should double the dosage. But remember Hank Paulsen told us everything is okay and the global economy is fine, so go buy stocks !

I am telling you that the psychology of this market is now broken and it is not going to be repaired without a major cleansing. Wall Street made of mockery of our securities markets with the toxic CDO's and mortgage paper and The 2 handle on short term paper is a sign of MASSIVE problems. The debt guys are much smarter than the equity guys, now what do they see that the equity guys don't. DO NOT DISCOUNT THE CONCERN OF THE DEBT TRADERS. It is real and it portends major problems that sooner rather than later the equity markets will wake up to . The volume on the ride down was enormous and on this rally off the bottom very light. This is not how bull markets act but rather this is the clue that this is a bear market rally which is quickly running out of steam. Bear markets drop on volume rally on substantially less and repeat forming lower lows and lower highs all the way. The opposite of the bull.

If the story today by Bloomberg's Jonathon Weil detailing Wells Fargo accounting doesn't wake you up to what is going on out there then nothing will. The fact that it took a cat from Bloomberg and not one of the myriad number of analysts on Wall Street to uncover this shows you how little 'analysis' is occurring at the brokerage firms. Just cheerleaders for their respective investment banking departments, nothing more. Good trading to you all.

Wednesday, August 22, 2007

Tisch, Ross and Pickens.

Okay so someone walks up to you and offers you the chance to become a business partner with the above mentioned cats. Pretty decent list I should think. The following charts are vehicles they are involved in.

Above is a weekly chart of Loew's Corp. The Larry Tische and family holding company, a mutual fund of their investments to to speak. They finished a big deal with Dominion resources some time ago. Do some digging around on this one. I think you will like what you find. Chart says not yet though.

The above chart is one I have covered before, International Coal Group. Municipalities can vote down coal intiatives all they want, peak oil is here and sticking your head in the sand will NOT make it go away. Might be a good idea to start perparing now, ya think? Wind and solar are NOT, I repeat NOT the answer, they are a drop in the bucket. A double bottom trying to form, maybe. The trend line is still there and until that is eclipsed all else is noise. This one is getting close now and bears more concerted watching.

The last chart above is of Clean Energy Fuels Corp. This is T. Boone Pickens outfit providing natural gas for fleet vehicles. I know of few who are more successsful in the energy arena than he so he makes a decent partner. The stock is newly trading and has a shorter history than we would like but as my notes indicate a move thru $14 and then the old highs would be fabulous. Remember these are just a couple of ideas for you to do further due diligence on and get yourself more familiar with. Good trading to you all.

Tuesday, August 21, 2007

The SOX, Suncor and the HUI

I mentioned the Semiconductor Index ($SOX) above a few days ago as it was testing the trend line (purple). We have broken said trend line and are now in a weak rally and testing it from underneath. The 50 day ma is toast and the 200 is putting up a fight. For more evidence have a glance at the volume, via the Semi holders (SMH), for this rally of the last 3 days. Very light which is what we would expect in a weak bear market rally.

The above is a daily chart of Canadian outfit Suncor. This is a play on the Tar Sands of Alberta. We look to be putting in a head and shoulders interim top with the neckline broken we can envision a target of $74. This may give us a good entry into the long term energy bull market via a reliable producer.

The Golds have fallen off every one's radar screen with the exception of the gold bugs out there. I have chosen the Amex Gold Bugs index ($HUI) to focus on. The above weekly chart shows a hi-lited long term support zone around 260. This margin related flush out could take us to the 240 area very quickly. You can visit the Amex web site and get the component issues of the index for some ideas to add to your shopping list so you can be ready when the flush happens.
The Gold Bugs daily chart above shows a close up picture of the most recent action we are well below the 50 and 200 day which is very negative. You must remember that if the Fed is going to cut rates and flood the markets with liquidity in an attempt to reflate, the dollar with absolutely be crucified. The central banks must get out of dollar holdings and gold will be the vehicle thru which they accomplish this. Few vehicles offer the liquidity of gold with a bid always available. That liquidity currently being taken advantage of by fund valets besieged with margin calls and unable to sell their toxic waste. We must wait and watch the charts for clues that the game is on, for now we watch. The $HUI in addtion to the price of bullion(GLD) is a great 1-2 punch to help us. Good trading to you all.

Charts of Nasdaq, Dow, S&P, and Russell 2K

The above daily chart is of the quad Q's (QQQQ) the tracking stock of the Nasdaq. I have noted what I believe is a head and shoulders formation which should give us a target of $43.50. (distance of neckline to head subtracted from neckline break). Also notice the current rally is taking us to the broken trend line (red) and while we could rally to the neckline to kiss it from underneath I suspect we may fail sooner rather than later. The volume on this rally is lousy and is indicative of a bear market rally rather than the start of a new leg up. I am adding to my QID position here.

The Spiders (SPY) daily chart above paints a similar picture to the QQQ's. In addition to the resistance of the broken trend line (green) we have the 200 day ma as another bear ally.

The above daily chart of the diamonds (DIA) shows another head and shoulder formation. This is the strongest index as the hedge fund valets out there seek refuge in the liquid multinationals. This will be small comfort when the U.S. economy rolls over as those expecting the global economy to carry everyone is shallow and wishful thinking. We are buyer every one's goods and the global economy is more interconnected now than ever. I was always taught that when the U.S. gets a cold Canada gets pneumonia. I believe the global interconnection we have now makes this premise apply to the world. At some point the Asia countries will develop a thriving consumer class but for now it is not enough to offset the demise of the U.S. consumer. I am adding to my DXD position here as well.

The final chart of of the tracking stock for the Russell 2000 (IWM). This looks like a continuation rectangle. As I noted it is contained by 80 and approximately 73.50-74. A break below this lower lever of the rectangle would imply a move to 67.50-68. Conversely and break above $80 would indicate a move up to 86. The tape will tell us. Good trading to you all.

Monday, August 20, 2007

Evidence of Smart Money ?

I am often emailed about being too critical of the hedge fund valets and private equity funds I have taken to task in this blog. The crux of which is that I am jealous and spiteful. On the contrary, nothing could be further from the truth. The are many outfits out there that are shrewd and savvy investors. The kind you and I would be lucky to have manage our money but they in the very small MINORITY and are few and far between. I am outspoken regarding the other 85% specifically due to the perception out there regarding their acumen and/or infallibility. I have listened to the institutional conference calls, the questions, oh those well thought out questions and the comments, the look at me I know something about this too comments. It is with much experience that I have come to this conclusion. Lowest common denominator ! A note to all those teachers who told us time and time again that there is no such thing as a dumb question, you never listened to those calls or you would never have made such a statement!

A rising tide lifts all boats rings so true as many of these funds employing ultra leverage make significant gains only to implode the minute things change. I went through this countless times with former customers who chased performance and confused it with acumen. I used to ask them to consider HOW the return was accomplished. My grandfather counseled me that you do not learn the worth of your skipper, physician or pilot till you are faced with adversity. Whether it be athletics, business, or life, truer words have not been spoken.

I now present further evidence, the Aegis failure and Cerberus actions of shutting down health benefits prior leaving many without Cobra. Please read the article, t is worth your time. And you will know understand why I read the last rites to Chrysler when Cerberus bought them. Good trading to you all.

The Dow, Wachovia, Indymac, and Citigroup.

Remember this chart (DIA) I posted last week? The bounce back thru the neckline looks very suspect. Let us watch this close as I think 120 is in play here.

The above chart of Wachovia Bank (WB)speaks volumes. We are getting an oversold bounce and nothing more. The bounce should be contained by the 50 as the 200 rolls over. For anyone who follows and knows moving averages this is not nice for the bulls. I believe we have a nice bear flag forming and a break below 45 (actually 44.75) would be ignition for the next leg down. Now remember, this is the outfit that bought GoldenWest Financial back in Sept of 06' (at the top?) If memory serves me still, GDW was a top 3 mortgage player in California. Do ya think they are immune to what is going on? Do I expect major 'impairment' announcements from Wachovia regarding this? Do I have a bone to pick with them? Absolutely, I was short GoldenWest Financial, just as buying mortgage brokers was in vogue, and am lucky to live to talk about it. Proof yet again that the market can remain irrational far longer than any of us can remain solvent. I would advise the cats who orchestrated the GoldenWest deal to get their resumes out ASAP if they haven't already.

The above daily chart is of Indymac Bank (IMB). Again another bear flag as the stock gathers itself for its next descent into oblivion. No amount of Fed easing will save these poor excuses for lenders the graveyard.

The Citigroup chart above shows another bleak picture. The weekly and monthly pictures(not shown) exhibit massive negatively diverging momentum. This cannot bode well for a top 3 player in derivatives. Steve Cohen(SAC) can add to his holdings of this all he wants but the tape tells the story. Besides, how many loans did they commit to and now are stuck with, Chrysler comes to mind but there are others. Believe me they can tell you how great this is now that they cannot move the paper but don't listen to that crap for a second. If it was so great they would have kept it for themselves in the first place. Remember the news conforms to the tape. Trend lines have been broken. The stock looks ripe for a move to $40. A break of $45 should burst the dam although same aggressive types may short up here into the 50 area. with good stop management. Good trading to you all.

Monday Morning Thoughts.

Is this all they can muster? Don't they realize this is the buying opportunity of a lifetime or could it just be the hook. The volume on this rally remains unimpressive. Yes, I see the the hammers all over the place. I just do not see the feds action as anything more than a compress to hemorrhaging wound. Nouriel Roubini makes a good case regarding this to be an insolvency issue rather than one of illiquidity and I have a hard time countering his arguments. Nobody is fessing up to what they own and what their losses are. No one is marking to market and biting the bullet. I will repeat myself again, the Japanese banks tried the same strategy of 'ignore it and it will go away'. The problem is it will not, for evidentiary proof look to the Nikkei, look to Japanese real estate, and look to the Japanese banks.

Rallies in this market are to be sold not weakness bought. if you are long it is a chance to lock in gains and minimize downside risk which I view as SUBSTANTIAL. This rally is an absolute gift, take it. The television pundits continue to do segments on where to hide in this market, well I have a a novel concept, how about cash ? Oh sorry, thats boring and doesnt make any of the sponsors and advertisers any fees of consequence.

We will get our opporunity to go long the commodity bull which is in a correction. Continue to do re-con on the energy(oils/oil service/coal, etc. the precious metals. Energy is in a short term correction long term bull market as are gold and silver. Do not lose sight of this.

Does it bother anyone else that U.S. Comptroller General David Walker compared the current United States to end of the Roman empire? This is not some black helicopter whack job here talking, although he must be making the reigning cognoscenti particularly uncomfortable. Remember to cut off your losers and add to your winners. Good trading to you all.

Friday, August 17, 2007

The Transports

I want to have a look here at the Transport Index ($TRAN).

The above chart is a monthly chart. Please note the shooting star which can be indicative of exhaustion and a reversal. Remember this is a monthly chart so it carries the greatest weight.

The above chart is a weekly view of the transports. Here we see again a shooting star formation along with a test of the trend line. The 40 week MA is broken which is not good.

And lastly we have a daily view. The 50 and 200 have been clearly broken. The trend lines are under assault. We must respect the hammer bar that occurred yesterday which could lead to a rally which should be contained by 4860-4950 area, coincidentally where the 200 now resides. Be flexible, stay focused. Don't get to caught up in the very short term(intraday). Don't pick the bull or the bear side but the right(correct) side. The big money is in the big moves. Be intolerant with losers and very tolerant with winners. Good trading to you all.

Fed Cuts

Obviously lots going on this morning with the 50 beep rate cut. I remember St. Louis fed governor Bill Poole saying 'it would have to be a calamity to invoke a 50pt cut' I guess we have a calamity on hand with a market down 10%. This should be your wake up call as to what it is really like out there. The FOMC(fed open mkt committee) must see something awful to pull out the stops like that. This is panic by the FED, in poker terms this is a major tell. I also take issue with market pundits calling any downside movement in markets panic and irrational yet everything to the upside is very sane and rational. This is not a Jack and the Beanstalk fairy tale.

I still believe rallies are to be sold here. This is going to be nothing more than a bear market rally. They are violent and painful to the over-extended. You will see big gains wiped away quickly but the tape still says down.

If you look at daily charts of the major indices and stocks you will see a lot of hammer or hanging man candle formations. These are the opposite of the shooting star. The look like at sledgehammer or a T. These often indicate reversals and again the longer the time frame the more meaningful.

Remember what the facts are. Have they changed? Has the housing debacle rectified itself overnight? Countrywide tapped 11 billion in credit lines. You don't tap these because you want to but rather because you are desperate and have too. This is a very negative sign so don't fall for the hook. This rally is a gift for you to lighten up if you had not already done so. It is an opportunity to go short if you are aggressive and have the stomach for it.

Remember if the fundamentals change we need to change as not doing so would be foolishness of the first order. Housing is responsible for 40-45% of job creation in the economy and the housing debacle WILL crush job growth. Housing represents 10% of GDP. Banks do not lend to build factories or for capital equipment anymore they are mortgage and derivative lenders. You want a crystal ball of what is unfolding you MUST look to Japan. The real estate/stock bubble in the late 90's is evidence of what happens when the banking system falls into a corner. Remember the Emperor's Gardens which is approximately 1.5 acres was valued(not worth) equal to the state of California. No amount of rate cuts (0.5%-1.0% rates) will help. The system must be purged of bad loans. Like a dead body it will rot if left unattended and disease and pollute the whole place. The Nikkei was 40,000 back then and is now sitting at16,150. 17 YEARS LATER !

Now take into account how little we save and compare that with the fact that the Japanese are professional savers(especially compared to us). Remember they own more of our treasury debt than the Chinese!

Housing appreciation has been THE driver of this economy. Remember home equity withdrawals accounted for 30% and 16% of new car purchases in California and Florida respectively. The avalanche of adjustable rate mortgages coming due is dead ahead. A leveling off of home appreciation would be enough to undercut this economy but a decline of some magnitude is the body blow. Remember it takes a lot of buying to put a market up (any market), it takes a mere lack of buying to put a market down.

Good trading to you all.

Thursday, August 16, 2007

The Semiconductor Holders

I want to address something I think needs some attention. I am hearing many talk about long tech/short financials. Which is a spread trade of which many can have merit. But before you run off thinking tech is a shelter in the storm please have a look over the following 3 charts. The chart is of the Semiconductor Holders (SMH) the tracking stock for the SOX index. As the semi's go so goes the Naz has been often said.

The above chart is the semi holders. on a montly basis. Please notice the 3 shooting stars. They often represent exhaustion moves and are a precurser to a move lower. For those inclined to heed warnings, well, this is your 3rd. Consider yourself warned.

The next chart (above) is of the semi holders on the weekly. Notice the 2nd shooting star also coincided with a kiss on the underside of the previous up trend line. Almost poetic. The 40 week ma is under assault as well.

The last chart (above) is the semi holders on a daily basis. As you can see the green up trend line is being violated today as I write. A close below it would be not be helpful if you are a bull on it. The 50 has been smashed and the 200 is toast.
Last but not least, we are in a bear market. DO NOT BUY THE DIPS ! Rallies are to be sold. Good trading to you.

The Yen and Some Random Thoughts

The yen is moving as we thought. These are not Yen bulls pushing yen higher rather it is yen bears covering. This unwinding of carry has MUCH further to go than many of you out there think possible. The yen bulls are going to show up on the scene later and will help our cause. I want any of you who are long yen (FXY) to thank the powers that be for educating all these hedge fund valets, (who may be auditioning as lemmings in the next Lion King musical as we speak), into conformist, safety in numbers, follow the leader mentality. They all thought they would be the one who could find the chair when the music stopped. Arrogance mixed with hubris, a lethal cocktail. The gap on the yen(see prior charts) is powerful and should be treated as such, mind the gap, as they say in the tubes of the London Underground. Corrections will come, do not fear them as they are necessary and restore health to overbought/sold markets. Once you are insulated you can set your stops and move on to other areas for due diligence.

Merrill finally puts a sell (yesterday) on Countrywide. Are YOU still listening to these guys. It takes a move from 45 to 25 for them to make that call. Did you not learn anything from Henry Blodgett and the tech bubble ? When will people learn that SELL SIDE (Goldman, Merrill, Lehman, Morgan, et al) of the street investment advice cannot be trusted. They have their own proprietary book of investments and are selling those positions to you. They ALWAYS have a reason to sell or they would hold and it is most definitely not your infinitesimal commission that drives the trade. Your sales rep(yes they are sales reps nothing more) may be a very nice person but he MUST peddle what he/she is told to peddle. One visit to a morning sales meeting/conf. call and you would run, not walk from your broker. Remember this and please protect yourself.

Why is it everyone is whining and crying for help when market goes down yet when market goes up beyond reason everything is okay? Is it unpatriotic for markets to go down. Is it unpatriotic to let other citizens, who borrowed what THEY KNEW they could not afford, now default and lose their homes. Aided and abetted by unscrupulous mortgage brokers, pandering politicians promoting home ownership for everyone. I think everyone should have a Cadillac and a Rolex, why don't we promote that as well. Read the Constitution and Bill of Rights I do not see home ownership anywhere in there or maybe my copy is missing a page. The time to pay the piper may be upon us. Dennis Gartman has often said the duty of the Fed is to take away the punch bowl just when the party is getting started. Unfortunately, we had a Fed Chairman, (Greenspan) who not only did not take it away, but rather like a mischievous college frat boy, spiked it with a gallon of tequila(cut rates to 1% in the wake of the tech bubble).

My grandfather often told me that the stock market is the only business in the world where you can hang a 50% OFF sign in the window and nobody shows up. Just as the market was disconnected from fundamentals on the upside, and oh yes they most definitely were, this market will disconnect on the downside. Psychology and sociology have more to with it than economics. Mike Panzner had a great piece on his site Aug 14th by David Leonhardt about P/E ratios which I recommend you read so you are prepared when Abby Cohen tells you the market is cheap on a P/E basis. Now this is from the same woman who were P/E's were in the stratosphere they conveniently did not matter. The fact that she is still employed and worse, many still listen, is a reminder that this is the land of the opportunity and anyone, and I mean anyone can make it !

Sell your losers and add to your winners. Good trading to you all.

Wednesday, August 15, 2007

The Rails and Emerging Markets.

On July 19th I said the following about 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."

The chart above shows the shooting star on the daily chart. Notice the massive volume. What I want you to pay attention to is what happened following the formation of the star. We jobbed around a little before commencing a not so insignificant, even to a Warren Buffett, decline.

Now I bring your attention to the Emerging Markets I-shares (EEM) which I hi lighted on Aug 6th. The focus of which was a shooting star on the monthly chart. This is a bearish formation happening on a very rare time frame(monthly). As if this is not enough, the weekly chart on EEM also shows a very negative bearish engulfing candle or bar July 27th. If the past is a prelude to the future, which it usually is contrary to what many will tell you, what has occurred following this formation on the rails does not bode well for EEM. Now some may say it fits the rails and tracking Asia and they may be but we need to concern ourselves with the charts. I know Asia and the emerging economies of the east are the place to be going forward but that does not rectify a very bearish monthly formation. Forewarned is forearmed.

Do more of what you are doing right and less of what you are doing wrong, hence we add to our winners and sell our losers. Good trading to you all.

Marathon Oil.....One to Watch

I have mentioned at length previously of my view that margin clerks are running this market. Whether it be the stock clerk or the banker who wants more collateral against the CDO's. This has led to the process of what Art Cashin has aptly called selling what you can not what you want. Hence the overt weakness in gold, silver, oil, et al. The areas of the markets that traders and hedge fund valets have some profits in. They know they should not sell their winners but in many cases they have no choice. I have encouraged many of you to be doing your due diligence or reconnaissance on what you want to own but for whatever reason missed. Marathon Oil is one such entity for me. Their recent purchase of Cdn Western Oil Sands only cements that idea. They now have a secure, viable supply source from a stable country, Canada. I will show you a long term (weekly) picture along with a short term (daily) so you can get familiar.

The weekly (above) shows a long term trend line in green which should offer some support around $45 area. We can and should expect this to be overshot, but remember this is not perfect science.

The daily chart (above) shows 2 potential we must recognize. The first is the development of a bear flag. The leg down forms what is known as the pole and the current rally(hilighted in yellow) is the flag. This is a very reliable pattern(according to Bulkowski studies). This would imply a move down to the $36-37. Crazy huh !
The second is what Elliott wavers would call a 5 wave down pattern. Jun-18-27 impulse wave 1. Jun 27-Jul16 wave 2 correction, Jul16-Aug6 impulse wave 3, Aug 6-13 wave 4 correction. with the final wave 5 down. Now I am not nor pretend to be an Elliott wave expert although I am arms length familiar with it. I have friends who are and I will check with them. I believe the wave 1 and wave 5 can have a 1:1 relationship which would invoke a target of $43.50 approximately.
I will now use this as a rough blueprint to follow Marathon. I love the underlying premise or story if you will and am a firm believer in 'peak oil' but I will not be foolhardy enough to let that override the charts. The great 'story' is a starting point but now that we have identified the target, we let the charts take over. Remember when someone tells you he is an investor we know better as investors are really speculators who made a mistake and will not admit it. Like Goldman averaging down, oops excuse me, investing with $3billion with their Alpha funds which are down 25-30%.
Keep your losses small and let your winners run. Good trading to you all.

Chart Review - James River Coal , Moodys, and Sears.

Let's start with Moodys (MCO). The above chart was posted on Aug 1st. where I was looking for a rally in the 60-63 area. The top chart shows what actually happened. The top tick was $59.89. We did get the rally that we envisioned. Does it makes us wrong that $63 was not reached. NO. This is not a perfect science. What we need to do is interpret what the tape is saying and I would interpret this stock as being even weaker than I thought due to the fact was that was all it could muster after a significant drop. Remember, we learn much more about stocks on corrective rallies/pullbacks than we do on the initial move. Volume and extent of correction of the stock and compared to its peers and the market all give us clues as to its health. Nothing is perfect but this is a close as it gets.

Let's look at Sears.
Here are my comments on Sears from July 16th "(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. "
And my comments 2 days later "Don't look now but Sears (SHLD) broke..... fasten seat belts, put trays and seats in upright position .......$135 here we come."

Well we reached target and then some. We should get a consolidation down here but real support is not until the 115-120 area. The stock needs to catch its breath before it can embark on its next leg down. Some traders would take some profits here (ie. cover half), others may move their buy stop just above the market so they don't give back too much. Whatever your strategy is, and you must have a strategy, stick to it and don't let CNBC, some analyst or some other emotional event make deviate from it.

Regarding James River Coal (JRCC). On Aug 2 my comments "The lows of the rounding bottom are being tested again this needs to hold here."

Well the jury is in and the lows did not hold, in fact the stock gapped thru. Exhaustion gap? possible, but for now we wait and watch and as I said before be patient. We must let the item we are watching stop falling, bounce, test the low, maybe bounce again and see if the first bounces highs can be taken out. This may still be inconclusive but it is a safer method than trying to catch the proverbial 'falling knife'.

Be extraordinarily impatient with losses and extraordinarily patient with winners. Good trading to you all.

Tuesday, August 14, 2007

The Dow, Oil Service Holders and Hedge Fund Valets

The chart above is the tracking stock for the Dow known as the Diamonds(DIA). I have sketched out a possible head and shoulders formation that would bring 122 into play as a target(neckline to tip of head distance) The $120 level from back in March looks like solid support which is obvious which makes me think that it might not hold as it is too obvious. The 200 and the lower trend line offer some support. I am short the Dow via the Ultra short Proshares (DXD). You may say hey, wait a second the Dow has been a bulldog(some bears call it the PIG though) and I remember he said we are supposed to put our rocks in the wettest bags as they break most easily. Well you are, no question. But, I am attracted to the Dow for another reason. The hedgie herd effect.

We all know how the 'smart money' hedgie crowd follow each other like small children playing a pee wee soccer game(think swarm of bees). I have documented on that at length. They need to be in equities for fear of missing the boat. Just like they all tripped over one another borrowing yen and buying toxic CDO/mortgage crap they are now buying 'the safe blue chips'. This is the reason I believe the Dow has held up much better than the other indices and the reason it will fall precipitously, they will all be tripping over one another to get out of the same thing to meet their margin calls. Lets face facts which most conveniently prefer not to do, and the facts are is we now have conservative money market funds who cannot meet redemption's because they cannot value their holdings to determine a NAV(net asset value). What do you think is happening with the aggressive, pedal to the medal I only know bull markets hedge fund valets (see below)get their redemption's. Maybe I will be wrong but the weight of the evidence and more importantly 'THE TAPE' says otherwise. Besides, whenever everyone goes to one side of the boat, the boat tips. Simple physics for the non-physics major.

Also tomorrow is hedge fund redemption notice day, which in the larger scheme of things is small potatoes but given the many hedge fund managers(oops I meant to say money valets as most of these guys perform functions no different than the parking valet handling your automobile, the same skill set just different uniforms) out there on the 'precipice of insolvency' out there it could lead to some fireworks. The true money managers out there know what I am talking about and won't take any offence to my comments as they are brought down by this lowest common denominator dilemma

As nervous as I am being long of anything in this market there are some areas I am watching extremely close. The Energy sector is at the top of that list. The oil service holders (OIH) above shows the support area that I am watching but we must also respect the fact that $177 is a level that, if broken on volume, could lead to a decent move. This series of higher lows from Aug 8th are encouraging but has occurred on contracting volume which makes its suspect. Also, we must keep in mind that there are lots of profits in this sector and many funds out there will be selling what they can not necessarily what they want. Stay flexible and keep losses small(via tight stops and small exploratory positions) in the event they whipsaw OIH if you play the move thru $177. Good trading to you all.

Tuesday Morning Thoughts

To show you all just how uncontained the mortgage problem is Thornburg Mortgage (one of Cramer's favs) is getting taken out behind the woodshed again today(that might be an understatement). These cats are a PRIME mortgage player! I repeat, a prime mortgage player so should we be surprised when today we get the lousy reports from Wal-Mart and Home Depot . Did you see how pained Mark Haines was when the Goldman retail analyst had nothing good to say about the WMT report. Nothing like impartially reporting the news Mark. To all those out there who get there ideas and nerve to jump in from CNBC just remember with a few exceptions(Rick Santelli for sure) these might as well be weather people giving you the news. Oh, and Mark it was Rothschild who said "I buy when there is blood running in the streets of Paris".

Maybe Ben Stein may want to have a look at Thornburg or The BKX or the XBD chart when he says the mortgage mess will be much ado about nothing. He says speculators are to blame, wow now is that original or what. Ya think he came up with that one all on his own? Probably stayed up late many a night coming up with that extremely cerebral hypothesis.

Goldman should call up Nick Leeson, John Merriweather, or the cats at Metallgescellshaft and find out if averging down on a losing positon works. Now Goldman can call it any number of things butthat is exactily what they are doing, averaging down a losing postion. On second thought I can save them the dime and give em the skinny on what happens. You end up broke ! Losers average losers, no two ways about it.
First we got this on AXA, then we got this on Coventree. Now as I am writing we get more of the same with Sentinal freezing redemptions. I will ask you again how many warning signs do you need to finally heed the warning to start protecting yourself. You must take care of yourself as no one else will. Please take heed and make the necessary adjustments. Go to cash, to to short safe treasuries, if aggressive look for shorts but do not sit by complacently listening to the charlatans tell you all is well while it is most definitely NOT !! Good trading to you.

Monday, August 13, 2007

Random Thoughts

I wanted to touch on the central banks and their liquidity injections. Here we sit with markets that are, in general, down approximately 8-10%. Yet we have central bankers who feel the need to inject, make available, call it what you want 200 billion. Is this panic on their part, my gut tells me yes. I could envision them pulling these tricks with a market 25-40% down but only 10%. Maybe I am immune to he nuances ignorant to the alchemy of international high finance. The type that turned shit (toxic sub prime, Alt-A and prime crap) into shinola (AAA rated paper) and was sold to arrogant hubristic smart money dupes(hedge funds) here and abroad.

Goldman Sachs is pumping 3 billion margin call (remember what I said about meeting those) into their hedge fund. Bet the ranch they spin it as an investment that everything is okay, hey we're Goldman. How many announcements that everything is okay only a week later to hear about significant deterioration blah blah blah do you need to hear before you catch on ? Hellooo McFly !! This problem as I have repeated over and over is not going away. Just like the tech bubble before each slide down will pause, bounce and catch its breath. The pundits will pound the table, proclaim the bottom is and you should buy. This is the furthest thing from the truth, as the lows will break and another slide will ensue and the process will feed on itself, till the problem is completely cleansed from the system. I wish injecting 200 or 400 billion was the answer but it is not. It will only delay the inevitable even more painful outcome. Alan Greenspan WILL go down as the WORST CENTRAL BANKER IN HISTORY EVER, supplanting Mellon for the title. Where is Paul Volker, who wasn't perfect but he had some spine, when you need him.

I caught candidate Ron Paul on Larry Kudlow's show the other night and I have to say that Kudlow is an embarrassing piece of work. I sat there flabbergasted at Kudlow's question of whether Ron Paul was an optimist on America and the economy. Since when did it make you a pessimist to state the facts which the symptoms of which are unfolding before our very eyes. Why are painful choices for long term survival pessimistic and short term, band aid, disease accelerating quick fixes optimistic? Is Kudlow that ignorant? Is he that blind? I'll give him this, he will be correct when he says this is the greatest story never told. He just needs to quit using it on the economy and apply it to the credit, housing, CDO mess. That fraud laden, deceit driven. corruption saturated mess will surprise even the most cynical and pessimistic among us. Our grandchildren will be reading about this tragedy and laughing at how gullible and brainless we could be. No different than current generations ridiculing the Tulip Bulb mania or the South Sea bubble.

Friday, August 10, 2007

End of the Day Thoughts

I want all of you to take a moment to think about something Jesse Livermore said in Reminiscences of a Stock Operator,

"it was never my thinking that made me the big money it was my sitting, got that !"

Now read it again and again till it sinks in, really deep. Now for those of you which if you have not read Reminiscences, please, I implore you, read this book. In the last few days I have had to ride my SRS which I own at 80 from 117 to 96, my SKF which I own from 71 from 95 to 78. Some may call it crazy and many have but as some of you may have noticed I have not put up a chart with a time frame less than daily and in fact have tried to focus equally if not more on the weekly charts. Please do not get caught up in the moment to moment hype of the machine that is Pompom TV (CNBC). One note regarding CNBC is it me or do all they say anymore is how much this or that is "off its lows", forget the facts just give me the fluff.

If that is what you need go to Cedar Point for the day, bungee jump, skydive, but do not fall victim to this with your stocks. I trust you see what I am trying to get across. I stack up with the best of them in falling victim to this. So much money left on the table it pains me more than words can say. Let your winners run, keep your losers small, and above all read Reminiscences of a Stock Operator. It will clear things up for you.

The point of this post is I want to remind you that now is the time to be drawing up plans for your shopping list. For example lets say someone loves the energy story, sees the peak oil thesis and buys into the view that nuclear could be some help. I like to watch Cameco (CCJ). Here is a stock I bought back in October last year about $36 with the Cigar Lake issues. I was stopped out only to watch it whip around and move to new highs AT $56. The recent action has taken it back to $39 right on the trend line support. I am not saying to jump in but what I am saying is to be doing your homework now with regards to what I might like to own say 6 months ago and it got away from me. Is the story the same, has it changed adversely, etc. Do not buy into the weakness but be on the lookout for a turn and its sustainability to initiate a position which you can then add to on further strength once insulated.

I read an excellent story years ago regarding General Tommy Franks and the siege of Baghdad. I will relate what I remember from memory so please forgive the omissions or errors of specificity as I am trying to illustrate a point. The city was surrounded by the 4th cavalry division and Gen. Franks sent in an armored column of approx 70 men comprised of Humvees. Bradley vehicles and some M1A1 tanks. the drove to the center of the city and fanned out in a cone to secure territory for the entire cavalry to enter. He was prepared to lose what he sent in the armored column to ambush or unknown and refused to risk his entire division. Applying this example to your trading that 70 man armored column would represent your initial exploratory position and the 4th cavalry would be your entire account. I hope you remember this example in your trading endeavors. Good trading to you all.

Capital One

I want you to take a good long look at the above chart. It a 12 year picture, which is not a insignificant time frame of a significant diversified financial player, Capital One. This chart is directed at those who think the sub prime, credit fiasco is coming to an end. I wish I could agree but rather the evidence argues that it is still early in the game with much to come. This rounding top is textbook and is evidence of a market in general rolling from bull to bear ! I do not say this lightly or with any vindictiveness but rather as a statement of fact. The financials must lead, there is no other way. I read once somewhere, and I stand to be corrected if I am wrong, that the entire middle east economies a few years back were smaller than the economy of Spain.

I would attribute this to their lack of a fractional reserve banking system and its multiplier effect in permitting the economy to grow. I don't want to debate economics as I am a neophyte but the expansionary phase we have experienced uninterrupted for the better part of 25 years is reversing. The evidence is weighted via the dollar and more importantly the bond market which I have gone on at length about. Remember 5 downward trend lines have been busted. For those who would still question this I would then question their objectivity. This can get lost when the facts don't conform to your view and we can all be guilty of it.

The Fed lowering rates is expected to be a panacea to the market, again I say look to Japan, look to Wells Fargo who raised jumbo 30yr rates from 6 7/8% to 8% overnight. Sometimes risk and default (2 words that many thought didn't exist until recently) mandates higher rates and this is a novel concept to the financial engineers out there in hedgistan who follow models and formulas and are disconnected from the real world. Kinda like their mark to model CDO portfolios were disconnected but I digress.

One last point regarding the Fed lowering interest rates. I would suggest you start to think about the implications to the U.S. dollar. All I can say to these rate cut proponents is BE VERY CAREFUL WHAT YOU WISH FOR ! Good trading to you all.

Energy and Precious Metals.... the piano player.

I want to focus on the following due to my belief we in a a LONG TERM major bull market in energy. By that I mean oil, natural gas, coal, uranium(nuclear), geothermal, along with solar and wind to a smaller extant. The Dow Jones US. Oil and Gas index ($DJUSEN) paints a great picture. The margin clerks are working overtime. Besides its liquidity there are some mucho profits in the is sector hence the selling. I know and they know to sell your losers and keep your winners but don't underestimate the fear/panic factor here.

The Amex oil index ($XOI) paints a similar picture.

The Philly Oil Service index ($OSX) again paints a similar picture.

The USO chart echos the above. We could shoot further down here but this is not the time to sell this one, one should be thinking to get long here on a turn. This is one market where as Pompom TV would say... the fundamentals have not changed !

As I noted above the ultimate liquidity around the globe. Always a bid and very liquid. Again some profits here coupled with the liquidity equals cash for the margin call. You are never supposed to meet a margin call or at least that is what I was taught. (its the markets way of telling you that you are wrong, gee have I said that before?) but now there is NO BID for this toxic paper around the globe and to meet the call they must sell what has a bid, hence gold and oil are similar to the piano player at the house of ill repute, which when raided, get hauled off to jail like everyone else ! Good trading to you all.

Thursday, August 9, 2007

Warren Buffett's Bank

I thought I would take a minute to have a look at Warren Buffett's bank M & T Bank corp. (MTB). Well, for starters gaping thru a 7 year trend line is now what I would call a bullish development. We then rallied up to kiss that important trend line from underneath and now continue our regularly scheduled program (bear market). Now Warren does not need any investment advice from me but he may want to buy puts or write calls to protect his long position as this thing had better hold $100 or 95 then 80 are the next stops on this train.
I want to say something about tech and this will be short winded. A lot of people are out there touting tech as the savior given the market deterioration. I have news for you if you want to play it safe and limit damage go to cash. DO NOT BE IN THE MARKET. It is not written somewhere that you have to be in the market all the time. Oooops sorry, it is written somewhere, the sales boardrooms and trading desks of all the brokerage houses. If you get out, they don't get any fees, ergo no bonuses. Are you starting to see the big picture here ? I hope so. Now regarding tech until the SOX (Philly semiconductor index) gets thru 560 convincingly the tech rally is very suspect to me. Good trading to you